Wednesday, August 13, 2008

Changing of the Tide

A major discussion of this forum is going to be the value of our currency; the US dollar. There are 2 major reasons why I like to focus as much attention as I do on our currency:

1. The news and financial advisors put very little focus on it's impact in the marketplace
2. It's impact on the marketplace is enormous

Over the past three weeks there have been massive ramifications based on the dollar's huge spike up, and subsequent spike down from other major currencies:

1. The price of oil has all but collapsed downward bringing with it the yearly cheers of the end of the bubble. These are the same cheers heard when oil prices fell from $50 down to $40, and $70 down to $50 during this bull market that began in 1998 when a barrel of oil was $10. The price of oil is going to $200 a barrel, and it's only a question of when we will arrive at that point.

2. The price of gold and silver have been pummeled. Similar to oil, these investments are very seasonal with their large moves up usually coming in the fall. A major reason for this is the demand from the Indian holiday season which begans in September. Also similar to oil, the cheers have come that the bubble has popped, just like when gold fell from $400 down to $325, and $750 down to $500, during the bull market that began in 2000.

3. The money that has moved out of commodites has moved back into fianancial stocks and retail stocks. This has also cause a short covering rally spiking these prices even higher.

4. When our currency is strong it also gives foreign investors confidence is investing in our beaten down financials because they feel that the money they will be getting paid back will still retain it's value. When foreigners are willing to invest in our debt it allows banks to lend more freely keeping mortgage rates lower. It also keeps treasuries lower as the money we send overseas for our debts continues to be recycled back into our country. This has helped the real estate market.

What we are witnessing right now is a short term reversal of the long term trade. We are currently in a bear market for the American real estate and stock market and a bull market for commodities. In a bull market you have long gradual rises with short term violent pull backs. In a bear market you have long gradual falls with short term violent rises. That is what you are witnessing now.

The following is a preview for a movie that comes out next Thursday, August 21. It will be shown for one night in theatres all across the country. It's a great opportunity to understand where the United States economy is headed in the future and how to protect yourself.

http://www.youtube.com/watch?v=HBo2xQIWHiM

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