Martin Armstrong: Capital Herding Into the U.S., Likely to Push Dollar, Stocks Higher Into Next Year

Fri, Sep 19, 2014 - 1:25pm

With mounting geopolitical tension, lack of opportunities overseas, and the relative attractiveness of U.S. markets, foreign investors are bidding up the price of U.S. stocks and the dollar, which is putting increasing pressure on gold, oil, and commodities, says Martin Armstrong.

Here are a few excerpts from his interview that recently aired to our subscribers (click here for audio):

“People have to understand that what is happening is that capital is very much international. And although the stock market is making new highs, simultaneously it is at a historic low for retail participation in the United States. Most people think the market is going to crash—this is it! You turn on the tv and they keep saying, "It's a bubble, it's a bubble!" But the retail people aren't in.

You have very interesting dynamics going on here. One, central banks are buying the stock market. Why? Because the euro is not a reserve currency and can't be—it’s too risky...you can't put your money in yuan; you can't put it in rubles. What are you going to do? The UK may break up. The British pound is falling apart. Canada is not big enough… You have Australia—that's too small of a market. New Zealand is too small. So, there's not much you can do.

You have about 30 trillion dollars in government reserves and wealth funds. About half of that is taken up in debt and they've been moving now into real estate and stocks just to diversify because there's no other place to put your money. And this is why the U.S. stock market has been pushing higher. And most likely it’s going to break out much higher going into next year…

I know a lot of people that hate the dollar, but you have to understand the dollar is really only the game in town. Yes, we have a big debt but that debt is absorbed by central banks just having to hold reserves. They're holding it in U.S. government debt. You can't hold debt of Greece. Debt of Germany just went negative…France is in trouble as well as Spain and Italy…

You go to New York and it's all foreigners buying the top-end real estate; same thing in Florida. China is the number one buyer of the highest priced real estate in the U.S. Canada is the number one buyer of real estate as far as the number of properties…

So, this is the trend as war develops more in the Middle East and also in Europe and Asia. Capital has no place to go but the United States and this is going to push the U.S. dollar up higher..."

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