18 Of The Dines Letter's Past Predictions

January 19, 1998

The Dines Letter was the world's only investment advisory to have predicted the Asian currency crash in advance. Some of these past 18 predictions are already coming true:

1. Our predictions of "competing currency devaluations" stretch back, but only now is it becoming visible to The Hive, so apparently some of our predictions really need time to become manifest. We have especially been warning that when the 100-yen level was breached a floodgate of economic woes would hit the Japanese banking system and stock markets. THE DINES LETTER, 6 May 94, Page 6

2. Like some underground river periodically bursting to the surface with abrupt mysteriousness to expose its existence, its true significance as ignored by The Hive as were the warning tremors from Mt Vesuvius, the chronic monetary crisis has yet again shaken the world's finances. THE DINES LETTER, 24 Jun 94, Page 1

3. An economic calamity in Japan could not occur in a vacuum. Furthermore, since the US dollar is tied to the currencies of countries such as Hong Kong and South Korea, these nations would also get more competitive against Japan, and other neighbors such that an all-out currency-devaluation war might burst on the scene from "out of the blue"! THE DINES LETTER, 29 Jul 94

4. The average person's life consists of twenty years of having parents ask where they are going, forty years of having a spouse ask the same questions and, at the end, the mourners wondering also. Except perhaps for central bankers who, considering the economic damage they have perpetrated, might arrive at a hellishly hot habitat. Debt bubbles are not a new invention, and history suggests that that legacy might not last much longer if paper currencies worldwide without an anchor to gold slosh around enough to precipitate a tidal wave movement that would be fueled by fear and the urge to safeguard capital, resulting in an international monetary upheaval of the first magnitude. According to Dinesism #20, "Bubbles are invisible to those inside the bubbles" and this is the biggest economic bubble in history, but none of us can see it because we are inside that bubble. In our opinion, the world is now in the earliest stages of a currency upheaval. THE DINES LETTER, 4 Nov 94, page 3

5. The Coming Currency Wars. As outlined in your editor's second book The Invisible Crash, the world has been in a chronic, subtle, and invisible currency crisis for many decades because there is no link to a gold standard, and we have repeatedly described all paper currencies as a "bunch of staggering drunks trying to hold each other up." Since gold was at $35, TDL has been predicting that, long-term, gold must keep rising. There were several currency crises in 1994. But, the crash in Mexico got Wall Street's attention. We still find it remarkable that their authorities blamed the peso's plunge on everything except its lack of a link to precious metals that would have limited peso printing. They will, and it is only a matter of time. It is still early in "The Coming Currency Crisis." The Mexican crisis proves the soundness of our recommendation to always keep your assets in more than one country as no nation is completely trustworthy with its paper currency. Note how quickly Mexico's crash came, which is what we expect in other currencies as the "invisible crash" moves into its visible stages. It is worth remembering how the Mexican smash dragged down most other Latin-American stock markets, revealing the element of "Mass Contagion". The panic has not yet spread to Asia. It is a reflection on many investors whose greed in the last three years pushed $127 billion into 10 Asian "emerging Markets" funds, over TDL's objections at that time. Now they will learn the lessons of "illiquidity." This is a mild version of what the eventual and final panic will look like, as what we call "currency Darwinism" drives newly-awakened paperholders to frantically scramble for what they will call a "safe haven" for their capital, which, for the moment, includes the US dollar, mark, Swiss franc and yen, but, eventually, sooner or later, what TDL calls the "ultimate money," gold, will come to the fore. Governments will blame currency drops on everything from revolutionaries to political events, but our leaders will, sooner or later, come to gold, because it represents truthful money, real money. All that exists in the universe is truth and resistance to it. It has been our adamant position since 1960 that nothing would stabilize currencies other than a gold standard, and we still hew to that position. One of the functions of a gold standard is to keep the size of government smaller, but the Washington Economic Establishment (WEE) refuses to take gold seriously and the public does not know because it is not told. THE DINES LETTER, Annual Forecast Issue, 20 Jan 95, Pg 9

6. We believe that Japanese banks must be teetering on the edge of disaster. Worldwide bank failures are a grave danger in the coming period but these bank failures are coming slowly enough so that the bank crash is still invisible to the public. By DIBUBBLE. THE DINES LETTER, 24 Mar 95, Page 3

7. It has been bedrock TDL belief that the world is in a low-key, chronic, growing currency crisis of the first magnitude, and that it will lead to the greatest transfer of wealth in recorded human history. Later, looking back, all will say it was obvious, and that the signs were everywhere. Paradoxically, the truly obvious is never obvious. It has also been bedrock TDL policy that currency flight would flit from one paper currency to another, whipsawed, until, finally, there would be a stampede toward the precious metals. THE DINES LETTER, 24 Mar 95, Page 7

8. Governments who borrowed in yen and sell in dollars are sitting on a financial time bomb, as their debt grows apace (Indonesia, Philippines, Thailand). Japan's model of protectionistically blocking imports might spread to Asia, since it worked for them. THE DINES LETTER, 21 Apr 95, Page 8

9. The follicle-puckering collapses of the Mexican peso and US dollar provide a good example of what might come next in the most unexpected places: Indonesia, the Philippines and Thailand have considerable exposure to loans denominated in yen, so as the yen goes up they need more dollars to pay off those loans, which causes distress. THE DINES LETTER, 5 May 95, Page 11

10. Nobody else in the world's press seems willing to speak out and demand by which authority politicians who know nothing about risky futures markets are speculating with taxpayers' money in the currency commodities markets, a scandal that will break at some future date, and all will wonder why nobody spoke out (incidentally, TDL's middle name is "nobody"). Our central bankers are more interested in manipulating "speculators" than in developing a sound currency; what a sad commentary on those who insist TDL is mistaken when we demand a gold standard that would block politicians from such folly. The currency crisis we have been warning about for a long time is certainly still present, although temporarily quiet, but it will return, and the Vesuvian tremor represented by Mexico's peso crash is what will probably happen elsewhere the world will yet again be "surprised." And where might it start? We have long written that Japan is in deep trouble, because of its banking-system's denial about their deteriorating collateral of stocks and real estate. THE DINES LETTER, 9 Jun 95

11. We are clearly in a doozy of a Brobdingnagian bull market it's time to make money! [DJI: 4589.64] The bull market was so sneaky that virtually nobody detected it, and it is remarkable how many smart investors have watched it slip through their fingers. Our Supervised Lists over on the last page show that 78% of our recommendations are held at a profit, some of them substantial, within our long-term goal of seven or eight winners out of ten.

We have been bearish on the Japanese stock market since 1989, especially on their stocks and real estate. Next we have been looking for "trouble in their banking system." For many years we have been looking for the "meltdown" in the international monetary system to start in Japan. The bottom line is that Japan is in deep trouble. THE DINES LETTER, 23 Jun 95

12. The US dollar is still in its Downtrend, but there will come a time when it gets much stronger and we shall attempt to call that turn. As usual we hope to get out within 10% of the dollar's nadir. THE DINES LETTER, 14 Jul 95, Page 10

13. The drastic 23% devaluation of the US dollar against the yen is beginning to reflect the resultant increased prowess of American corporations worldwide by generating "surprising" profit gains. That is why we have been calling this particular bull market a "Currency Market," with its own unique characteristics. First of all, the US market should rise by 23% simply to "equalize" itself against the Japanese yen, thus much of the rise has to do with international monetary finance rather than emerging dividends, and this has misled many fine market observers. Second, we expect this Currency Market to be crowned by a thorny currency situation. In recent years we have attempted to anticipate how the upcoming crisis might devolve. It has been said that any new venture goes through the following stages: enthusiasm, complication, disillusionment, search for the guilty, punishment of the innocent, and decoration of those who did nothing. Japan's banking system is heavily-leveraged with real estate and stocks that are down sharply, and have become hopelessly under-collateralized. For a long time we have warned that the currency crisis we envisioned would start in Japan, and probably in their banking system, so we were surprised when it struck the Mexican peso first, but Japan is probably next in line.

Trouble in the Japanese banking system is certainly no surprise to long-term TDLrs, as we have warned of it repeatedly over the years, and we believe that this bullish Currency Market might end when their banking system erupts. Until now, TDL's warnings about Japan's banking system have been shrugged off as a "kook" position, so we were surprised at the subsequent explosion of international press coverage, just since our last TDL, questioning not only Japan's credit unions but other Japanese financial institutions. We are giving Japan extra-close coverage because we want you to be clear on how important it is. TDL insists that if the world's largest banks go under, repercussions would be extremely negative for the rest of the financial world and might well trigger a panic flight toward gold, which we consider to be "the ultimate money." Search the following excerpts in vain for any mention that nearly all of Japan's monetary reserves are held in the form of US paper dollars, so if the dollar itself also gets into serious trouble, the bottom would come out of the Japanese financial system in a self-feeding vicious cycle. Many years ago we recommended that Japan beef up its gold holdings; they hear and do not listen. They have not yet even figured out that the central bankers did it to them, as will be clear a long time from now. THE DINES LETTER, 11 Aug 95

14. The failure of Tokyo's largest credit union threatening to precipitate a meltdown in the Japanese banking system apparently triggered enough of a panic in central bankers for them to frantically push the dollar up against the yen. Actually, as we have been warning all along, countries with the strongest currencies (Japan, Germany, Switzerland) lost market share to cheap-currency nations (US, Canada, Mexico) sufficient to trigger severe economic downturns in the former. The Clinton Administration's policy of pushing the dollar down in order to balance our trade deficit with Japan has obviously been recognized as a failure and reversed, with no realization of the idiocy of cutting down our pristine forests in order to print dollars used to buy previously-printed dollars manufactured from our pristine forests! We have been describing 1995 as a "Currency Market" dictated by international currency fluctuations. Indeed, it was last year's dollar crash against the yen that tipped us off to our bullish predictions for 1995 when few others grasped its implications. The Bank of Japan will probably also cut its interest rates soon, to weaken the yen against the dollar, but they don't have a clue. Nobody in the world's press seems to realize the interconnectedness of these upheavals: consider this week's crisis in the Russian banking system and the plunge in French financial markets connected to trouble in Japan's banks. THE DINES LETTER, 1 Sep 95, Page 1

15. The Banks' Gathering Storm. The under-collateralized Japanese banking system loaned too heavily on real estate and stocks that are down anywhere from fifty to ninety percent, and any panicky withdrawal of deposits, or a further plunge in real-estate prices, could set off a world-class panic. Also we have banking problems in Russia, Brazil, and China. Especially alarming: The People's Bank of China has admitted that one in every five bank loans was overdue, a drastic understatement. How did we know that China was going to get into trouble? Their money supply "growth" is over 20%, so inflation should be at least at that level, not even counting the cumulative impact. We continue to recommend avoiding China's stock markets. THE DINES LETTER, 15 Sep 95, Page 7

16. All stock market manias are eventually punished by declines because they attract the Mass gambling element that secretly wants to lose, so their presence is prime facie evidence of a Top. It's all paradox. Like the new movie Showgirls that was "X" rated to discourage attendance, which ironically whipped up interest in it. When will they learn that "banned in Boston" is an ironic enticement? And when will investors realize that the mania in gambling casinos -- we are told it is America's fastest-growing industry -- will eventually experience a suppressive backlash against gambling, of the first magnitude? We still appear headed for lower interest rates, so bonds, banks, insurance, foods, beverages, soaps, tobaccos and utilities should continue their bullish ways. THE DINES LETTER, 6 Oct 95

17. We have been repeatedly told that the bank crisis is over, but since Japanese banks are the world's largest, and since their real-estate and stock prices might drop even further, we are concerned that an international currency crisis might spring out of the situation that could trigger a Mass panic toward the security of gold and silver.

Desperation has even prompted the Japanese government to buy real estate to prevent further collapses (and also to bail out some buddies). Since most bank lending used land as collateral, the fall has resulted in bad loans at Japanese banks reaching somewhere between a half-trillion to a staggering trillion dollars. We reaffirm our long-standing predictions of "The Coming Competing Currency Devaluations." THE DINES LETTER, 6 Oct 95

18. "Asia's Coming Time of Troubles." In 1968 we made the shocking prediction that western civilization had peaked, and then in 1976 we moved TDL from Wall Street to San Francisco because we expected it to become "America's window on Asia." In 1979, after a lecture tour around the Pacific Rim, we wrote that the 21st century would be looked back on as "The China Century," but communist China was then among the poorest nations on Earth, and that prediction was so scorned that many TDLrs did not renew their subscriptions. In 1989 we flashed a Major sell signal on Japan around 38,000, and it will be looked back on as a great signal. It still stands. In 1993 we turned bearish on Chinese stocks, just as the rest of the world was becoming increasingly optimistic, again marching to our own drummer. Hong Kong is in danger of beginning a Major decline around the summer of 1997. As predicted in the Mass Psychology book, prosperity will next move to India, Central Asia and, early in the next century, finally reach long-suffering Africa, continuing westward around the planet (see Mass Psychology book, page 139). We have become increasingly bearish on Asian stocks in recent years (including Japan, Korea, Thailand and China) based on DIWPAT.* THE DINES LETTER, Annual Forecast Issue, 17 Jan 97

Dines Wolfpack Theory, see Mass Psychology book, page 328.


India is perennially the world’s largest gold consumer.

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