dollar
Written by Dani, February 22nd, 2012
(This is a podcast summary. If you read this blog and enjoyed it, listen to Doug’s podcast this week for even more details on these topics, and please share this information with others who might benefit from our perspective.)
Market update
Technically, the market looks fine, but the fundamentals continue to be troublesome. We all know about the financial troubles in the EuroZone, and we have our own deficit spending and low interest rates in the U.S., which serve as an artificial stimulus in the market – again showing that our fundamental stability is not where it should be, in our opinion.
Greece has been a concern for us for weeks now, and we believe it will be for some time, as Italy, Portugal and others follow in its financially unsustainable footsteps. As we continue to look at fundamentals, European and Japanese economies are not growing, and the U.S. is growing very slowly. Job growth is weak, and political acrimony is very high in the U.S.
We know that the markets are up, and so technically it looks like our advice to be cautious has been wrong so far this year. However, we still believe that the fundamentals are going to come into play soon. In 2007 and 2008, the market ignored the fundamentals and only focused on the technical side, which was, as we all remember, a very dangerous environment. We still advise patience and caution, as we believe the markets will center in on their fundamentals this year.
Is Greece Fixed?
Speaking of fundamentals, this is a story that we believe shows what we are talking about in the markets. In Bloomberg yesterday we saw this headline: “Greek Rescue Leaves Risk of Default Alive in Europe as Austerity Deepens”
The story goes on to say: “Europe is still struggling to avoid the threat of default as investors warned Greece will soon risk violating the terms of its second bailout in three years.”
“Seven months of negotiations ended in the pre-dawn hours in Brussels with Greece winning 130 billion euros ($172 billion) in aid it needs to avoid a March bankruptcy. Any respite may prove temporary after it signed up to a program of austerity and economic reform aimed at slashing debt to 120.5 percent of gross domestic product by 2020 from about 160 percent last year.”
Our opinion is that the bail-out bandage is on, but it won’t take much to come off again. Remember, that Greece has been in a recession for five years. Frequent strikes and riots are a risk, tax revenue is still a difficulty, and so even though the headlines say that Greece is fixed, there is almost sure to be continued pain in this area. We believe that risk in the market remains high.
Read the blog tomorrow for an update on buying gold, and please listen to the podcast for more detailed analysis.
Written by David, December 30th, 2009
Last week we talked about what I think will be a big investment theme for 2010, rising interest rates. This week we take a look at the second installment in our series on the top 10 investment themes for 2010—currency upheaval.
Now when I say currency upheaval, I am talking largely about the fortunes of the U.S. dollar. To be certain, the dollar has had a lot of upheaval in 2009.
After starting the year with a stout surge, the dollar’s fortunes turned tail in March. And with a few brief periods of sideways movement, the greenback plunged to record lows in late November.
Interestingly, the dollar has been on a sharp run higher since the first week of December. In fact, the dollar recently broke above its short-term, 50-day moving average (blue line), and now appears on route to break above its long-term, 200-day moving average (red line). If the greenback can breach this technical barrier, it could be the start or a protracted bull in the U.S. dollar vs. rival foreign currencies.
This is the kind of currency upheaval I expect will take place in 2010. As more and more countries try to keep the value of their currency low to help stimulate exports, we are likely to see more money move into dollars. Also, the rise in the dollar could mean a pullback in the price of gold.
The price of gold, as represented by the streetTRACKS Gold Trust (GLD), has been on a tear for most of the year. However, since the dollar’s December resurgence, the value of gold has declined precipitously.
I think that the currency upheaval we’re likely to see with the dollar—and with other currencies around the globe—in 2010 will mean opportunities on both sides of the gold trade. It will also mean opportunities on both sides of the international equity market trade, and on both sides of the domestic market trade.
Just about any way you look at it, currency upheaval in 2010 will cause both dislocation and opportunity for investment capital. The trick, of course, is to know which is which, and to be on the right side of the trade.
Written by David, December 16th, 2009
The U.S. dollar had been getting hammered for much of the past year, but recent debt problems in Europe are giving the greenback a lift. Fortunately, there are exchange-traded funds (ETFs) that you can buy to help you profit from the rising dollar.
Whether the recent upward trend in the greenback is only short-lived, or the start of a long-term trend remains to be seen. However, currency swings due have a tendency to be sustained longer than most might expect. The latest example is the big drop in the value of the U.S. dollar earlier this year. In my view, this plunge exceeded what reasonably was warranted.
If the dollar continues to rebound, the greenback’s resurgence could offer a nice chance to profit. One of the funds that I have on my radar screen for investing in the dollar is the PowerShares DB US Dollar Index Bullish (UUP).
Keep in mind that the greenback often is considered a safe-haven currency. When markets are jittery and governments are in danger of defaulting on their debt obligations, the dollar generally rises. A key reason is that investors seek the protection of a currency that is backed by the full faith and credit of the U.S. government. Yes, Uncle Sam still conjures up images of strength when the rest of the world seems to be falling apart.
The Wall Street Journal wrote a scary story about the outlook for the euro in its Dec. 15 issue. It described how the euro is tumbling as debt woes spread across the euro zone. Greece, for example, appears unable to stem growing fears about its debt problems, despite government pledges of austerity and fiscal rigor. New worries about Austrian banking, after this week’s surprise nationalization of one of the country’s banks at the behest of the European Central Bank, also raised red flags about the euro. Yesterday, the euro dropped to its lowest value since October by falling to $1.4505.
In addition, a German government budget spokesman said this week that exploding budget deficits of economically weak European countries will force his country and other financially strong nations throughout the continent to consider how to support their struggling neighbors. These so-called “PIIGS,” i.e., the countries of Portugal, Ireland, Italy, Greece and Spain, are weighed down by big budget deficits and discouraging growth prospects.
Without question, the U.S. government is running up record deficits of its own and its economy is not exhibiting robust growth either. But America still has a reputation as a country that has proven its creditworthiness. The reaction of the market during the past week or so confirms the sentiment that the dollar offers a safe harbor in the midst of a brewing financial storm.
Written by David, October 14th, 2009
The value of the U.S. dollar has been hammered in recent months, and observes—me included—feel that the greenback’s decline is bound to run out of steam sooner rather than later. When this happens, investors will have a chance to profit by riding the U.S. dollar higher. Of course, nobody knows yet when a reversal of fortune for the dollar will take place, but when it does, you’ll want to be prepared.
One fund that lets investors bet on the recovery of the U.S. dollar is the PowerShares DB US Dollar Index Bullish (UUP). Investors also may view the UUP as a hedge against a falling stock market and a slowdown in the economy. UUP is an exchange-traded fund (ETF) that gains in value as the value of the U.S. dollar climbs and rival foreign currencies fall. In a nutshell, UUP is a bet in favor of a rising dollar.
For those of you who may be eyeing an investment in the dollar, UUP could be a good way for you to hedge against what I suspect will be asset deflation in the equities and a decline in prices stemming from a declining economy. However, such an investment only should involve a small portion of your assets, since it is meant to serve as a hedge against a potential decline in the market and in the economy. If you opt to invest in the dollar, do not make it a primary holding in your portfolio. You also will want to put a stop loss on this position, if choose to buy it. Only risk the amount that you are prepared to loss, since a bet on the U.S. dollar right now is a gamble that the current downward trend of the greenback will reverse.
A final warning on any dollar bet is that if you are not willing to place a stop loss on your position, don’t even think about buying UUP. I cannot stress enough that a hedge position such as this mostly serves as insurance in the event the market comes down and the economy continues faltering. If the idea of hedging seems a bit of a stretch to you, you’re probably better off avoiding such investments.
Written by David, September 01st, 2009
I’ve never been the kind of guy who responds well to scare tactics. In fact, it takes a lot for me to start climbing the wall of worry. So when I tell you that I am worried about what I think is a looming, and very dangerous, currency crisis, well, let’s just say that I highly recommend you take it to heart.
Everyone knows what’s been taking place in Washington, D.C. over the last eight months. We’ve seen a veritable explosion of reckless deficit spending, with the federal government issuing massive amounts of debt and running the printing presses 24 hours a day, seven days a week in an effort to snatch the slumping economy from the clutches of the worst recession since the Great Depression.
Now, in addition to the massive federal spending that’s taken place, President Obama and his Congressional cohorts continue pressing for a nationalized healthcare program—a program that could end up costing Americans’ trillions of dollars per year. How are we going to pay for this grand healthcare plan? Certainly higher taxes on the so-called “rich” are coming, but soaking the rich won’t be enough. Filling the cost void will undoubtedly mean the issuance of more and more government debt.
Already, the amount of debt the country carries is costing us billions of dollars a year in interest. And with all this deficit spending, we’ve witnessed the value of the U.S. dollar vs. rival foreign currencies descend approximately 12% in just the past six months! The declining value of the greenback is part of the reason why the prices of both oil and gold have gone through the proverbial roof.
Right now we are sitting at the crossroads of what could be a transformative turn in the history of our beloved currency. Now is the time to prepare for what I believe may be a currency catastrophe.
Ask yourself the following:
- How would a currency crisis affect my wealth?
- How would my stocks, bonds and mutual funds react to a decimation of the dollar’s value?
- What steps can I take to shelter my money from the fallout of a dollar debacle?
The answers to these questions and many more, will be the topic of my next one-hour teleconference. This teleconference is scheduled for Tuesday, Sept. 15, at 11 a.m. Pacific time, 2 p.m. Eastern time. To sign up for this FREE one-hour conference call, simply click here.
In addition to answering the above concerns, I’ll be sharing with you four strategies using my favorite investment tool, exchange-traded funds (ETFs) that you can use to actually profit from a dollar decline.
The next teleconference is Part Two of a Five Part Series I’ve created on the impact the Obama administration and Congress could have on your money. This series will cover what I believe you can do to protect and build your wealth, even as these politicians plot to destroy it. My friends, the Federal Reserve, the Administration and Congress all are taking unprecedented risks with our tax dollars and our children’s future. If you are as concerned as I am, make sure you register today for this special teleconference series.
Remember, one of the greatest freedoms we still enjoy in this country is our freedom to act independent of what the government wants us to do. Well, the time to act is now, and doing so is just a click away. Keep in mind, however, that this event will fill up quickly. Due to technical restrictions we are limited to just 800 participants so make sure you reserve your place and register today.
I look forward to sharing my views with you on Sept. 15.
Sincerely,
Doug Fabian
P.S. I will prepare a comprehensive handout for you to download prior to the event so that you can more easily follow along and take notes.
Note: Fabian Wealth Strategies, Inc. is a registered investment advisor with the U.S. Securities and Exchange Commission. Doug Fabian is a registered investment advisor representative. The information expressed in this seminar is for educational purposes only and should not be construed as a recommendation to buy, sell, or hold any specific security. Consider the risks, fees, and expenses before making any change to your investment portfolio.
