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Weekend Edition

Here's what happened the last time the dollar almost died...
Saturday, July 12, 2014

 Global stocks are plummeting... 10-year Treasurys fell to 2.52% and 10-year German bunds hit a two-year low of 1.185% on Thursday.
Gold and silver – also acting as "safe havens" – jumped more than 1% each. Palladium hit a 13-year high.
 And we have Fed Chair Janet Yellen to thank for all of this (as well as problems in Portugal, which we'll address in a minute).
According to the minutes from its June meeting, out last Thursday, the Fed said it would likely end its bond-buying program (with a final $15 billion reduction) in October.
The Fed also said it wouldn't hike the federal funds rate for a "considerable time" following the end of quantitative easing. It expects inflation to remain low.
Traders took the continued accommodative policy as bullish news for precious metals... with a longer-term view that the Fed won't be able to control inflation as planned.
 Portugal's largest bank, Banco Espirito Santo (BES), has delayed interest payments on its short-term debt. Portugal received a €78 billion bailout in 2011. The difference between a liquidity problem and a solvency problem will only become clearer in the future as we start to see more troubled banks surface. This temporary loss of faith in the financial system is another reason precious metals are soaring.
BES shares fell 17% before they were suspended from trading on Thursday. The selloff took the air out of momentum stocks.
 One of the clearest signs of the top leading up to the 2008 financial crisis was Dubai's absurd real estate. The small Arab nation was building the Burj Dubai, the world's tallest skyscraper.
We wrote about the skyscraper indicator in the October 13, 2008 S&A Digest.
It's one of the most obvious pieces of financial advice you'll ever receive: Never invest in the country building the world's tallest building. Dubai, home to the Burj Dubai (the newly completed world's tallest building), is in trouble. Government-controlled companies in the oil-rich nation owe at least $47 billion, more than Dubai's gross domestic product.

Dubai is looking to Abu Dhabi and the United Arab Emirates for support. You'll recall the Empire State Building was completed in New York in 1930. The World Trade Center and the Sears Tower were both completed in 1973. The Petronas Twin Towers in Malaysia were completed in 1998, just in time for the Asian crisis. Taipei 101 (in Taiwan) looked like it might finally break the curse. Taiwan's market has rallied since it opened in 2004... until very recently. But the curse of the tallest building finally caught up with it...

 Dubai also built manmade islands to house wealthy residents, the world's most expensive hotel (the Burj al Arab), an indoor ski slope, and replicas of global landmarks like the Eiffel Tower... In total, Dubai borrowed $80 billion to turn itself into a global tourism hub.
We noted the madness had peaked when, in addition to building replicas of famous landmarks from around the globe, Dubai started building replicas of Dubai landmarks – located miles away.
 We all know what happened next: Dubai collapsed.
Now, the emirate is back in the headlines for its creative real estate efforts...
 In one of the greatest signs of the top we've seen to date, Sheikh Mohammed Bin Rashid, Vice President and Prime Minister of the United Arab Emirates, announced plans for the world's first temperature-controlled city in Dubai.
The 48-million-square-foot facility will have the world's largest shopping mall and the world's largest indoor amusement park. There will also be 100 hotels (20,000 total rooms) and apartment buildings. (You can watch a YouTube video of the project here.)
 More signs of a top...
As of Tuesday, companies have offered $510.1 billion of stock and stock-linked securities (like convertible bonds) in 2014, according to data provider Dealogic. That's above the previous record of $498.9 billion set back in 2007.
 All the madness is scaring one billionaire investor out of the market...
Distressed-asset investor Wilbur Ross told CNBC this morning, "On balance, we've been a seller. We've sold six times as much as we've bought so far this year... everywhere."
Ross noted the market's all-time highs, saying "with markets [near] all-time highs, it shouldn't be surprising that there are more things that are attractive to sell than [there are] to buy."
 Last week, Steve Sjuggerud wrote a wildly popular series of essays in DailyWealth talking about the most important book we've read this year – Jim Rickards' The Death of Money.
 You might wonder why we're making such a big deal about this book. The truth is, we have a huge amount of respect for Rickards.
He served on the front lines of many financial crises... He was general counsel for hedge fund Long-Term Capital Management (LTCM), which collapsed and nearly brought the economy down with it... Rickards led the bailout talks for LTCM with the Federal Reserve.
He's a 35-year Wall Street veteran. And when the government has questions about currency and finance, it calls Rickards. He has seen what happens to currencies in times of crisis... And he has a rare inside perspective.
 Steve continued his discussion of Rickards and The Death of Money in Monday's DailyWealth. In it, Rickards recounts when President Nixon abandoned gold convertibility. "Foreign creditors no longer trusted the U.S. dollar as a store of value," Rickards wrote. He noted the U.S. Treasury was forced to issue government bonds denominated in Swiss francs.
The selloff in the dollar didn't stop until the Federal Reserve head at the time, Paul Volcker, raised interest rates to 19% in 1981 to stop inflation and make the dollar attractive to foreigners.
 We have a similar situation today. From Monday's DailyWealth...
Rickards says a "similar constellation of symptoms to those of 1978 can be seen in the world economy today." In recent years, the U.S. dollar index hit an all-time low – below the 1978 level. And gold hit an all-time high, around $1,900.

Today, U.S. government debt is at a record high, and the Fed continues to print money at a record pace. There's no doubt this will end badly, as my colleague Porter Stansberry has predicted. The only question is when. You can't ignore the possibilities of a potential collapse in the dollar.

In his book The Death of Money, Rickards puts the dollar under the microscope, and then explains the signs to watch for as the dollar – as we know it – heads toward what he believes is an inevitable death.

 We like Rickards' book so much, we bought a few thousand copies to give to our readers for free. We simply ask you to pay for shipping and handling (which is less than $5).
Thousands of S&A subscribers have already taken us up on our offer. To make sure you still receive your copy before we run out, click here for the details.
Sean Goldsmith

This Week's Winners
S&P 500 Symbol Change
PetSmart PETM +4.6%
Alcoa AA +4.3%
Archer Daniels Midland ADM +3.5%

Countries Symbol Change
Indonesia IF +4.8%
Brazil EWZ +1.6%
Lat.America ILF +1.4%

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Real Estate IYR +1.0%
Gold Mining GDX +0.4%

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Gold +1.4%
Zinc +1.4%
Date Range:7/3/2014 to 7/10/2014
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Cliffs Natural Resources CLF -9.8%
First Solar FSLR -8.4%
Salesforce CRM -7.6%

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Spain EWP -4.6%

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Internet FDN -4.1%
Biotech PBE -3.9%

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Date Range:7/3/2014 to 7/10/2014
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