In the United States, the inverted yield curves have
persisted for the longest period in history, inevitably suggesting an impending
recession. Will the US lower interest rates soon? That seems unlikely. Let's
consider a few factors:
There is a risk of prolonging and exacerbating inflation if
interest rates are reduced too soon.
Higher interest rates attract capital to the US,
strengthening the US dollar against other currencies. This is advantageous as
the US grapples with its burgeoning $35 trillion debt and the need to print
more money to service interest payments.
Despite the US's monetary expansion, the USD remains
relatively robust compared to other currencies, many of which are burdened by
economic downturns and mounting debts, potentially leading to defaults.
The US may prioritize the stability of other economies
collapsing before its own, strategically timing interest rate reductions to
maintain the strength of the US dollar against global currencies.
In the event of global economic collapses, the US would
likely increase money supply to acquire assets from distressed economies while
managing its own debt burden, impacting all holders of US dollars, including
domestic and international entities.
The Buffett Indicator currently stands at 199%,
approximately two standard deviations above the historical trend line,
signaling substantial overvaluation of the US stock market relative to GDP.
This explains why Berkshire Hathaway is amassing a record-high cash reserve of US$190
billion, anticipating a significant stock market crash to deploy its war chest
strategically.
As the Hong Kong Dollar is pegged to the USD, it has also
strengthened against other currencies. Hong Kong stocks, which mostly represent
companies operating in China, have been in a bear market since 2021. There are
signs that the worst may be over for China and Hong Kong, as China's special
economic zone's window aiding China in its trading with other countries will
benefit from its recovery. Consequently, I have started purchasing promising
stocks listed on the Hong Kong Stock Exchange. My technical analysis indicates
that the HK market has rebounded from its bottom.
So, when exactly will the crash occur in the over-exuberant US market? We are awaiting a black swan event in the US to set it off. Judging by Warren Buffett's recent actions and the Buffett Indicator, it seems imminent. I am closely monitoring the charts and keeping more cash, including funds invested in 6-month T-bills, on hand to buy the dip, which could be as much as a 40% decline.
Superphang
http://superphang.blogspot.sg
