s_knight8
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 Posted:
Thu Nov 11, 2004 4:01 am Post subject:
The Dollar Worrywarts Are Wrong |
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THE KAHUNA'S RANT O' THE WEEK: The Dollar Worrywarts Are Wrong
-- By Tobin Smith
Human beings have an amazing capacity to worry. Most people NEED
to worry -- it has to be DNA-encoded into our systems. What's
weird is studies show we worry much more when times are good than
bad.
When things are REALLY bad, our neuroses and psychoses go away.
Do you realize that while the buzz bombs dropped every night in
Britain during World War II and the outlook was so bleak, what
they call "incidence of psychiatric disorders" actually fell to
virtually zero? Cases of suicide or attempted suicide were
non-existent.
Yet when the war ended, incidences of psychiatric disorders jumped
back to normal rates as things got progressively better!
Worry is a big part of investing. My strategy is figure out what
issues I should worry about and what issues are not worthy of
worry. And what really interests me is when a large group of
people worry about something that is really NOT a worry.
Like the dollar.
WHAT MAKES A BEAR COME OUT OF THE WOODS?
In the face of a wartime federal deficit, the dollar bears have
come out of the woodwork.
"The twin towers of budget deficits and trade imbalances have
doomed the dollar," they say. It's only a matter of time when the
foreign banks that own over 50% of our public debt will run for
the exits and lead to a massive dollar collapse that runs our
growing iconology into a deep recession.
Hogwash! The dollar was significantly overvalued against the world
currencies. This was, in fact, just one of seven major bubbles
that hit the U.S. in the late '90s.
What we are seeing is the late stage of unwinding that bubble. And
remember this, for the dollar to drop beyond its normal trading
range, another currency has to rise.
And unless we are going to start trading oil in the Canadian
dollar, that leaves the euro or the yen -- two currencies that
MUST NOT stay at their high trading ranges or their tepid 1%
growth economies WILL turn to recession.
Here are the facts. The dollar hit a record low against the euro
on Monday -- close to $1.30. That's the lowest since the single
currency's inception in early 1999. But look at Europe's economic
conditions. Overall European retail sales slid for the third
straight month in October.
Other than Great Britain (which is still on the pound and I'm sure
will remain there), sky-high unemployment continues to strangle
domestic consumer spending. Japan's REAL unemployment rate is
about 9%, and with the radical ageing of the populations in both
areas they simply CANNOT grow without exports.
Remember, sports fans, these currencies are tied to economies that
relied upon exports for virtually all economic growth since the
'70s. And remember, too, that the lower dollar HELPS U.S.
companies' sales power and earnings -- something we WANT to see.
So the dollar will be in a trading range with the yen and euro as
the self-interest of each economy fights off extreme valuations.
O CANADA!
We are bullish on the Canadian dollar, and we are adding 10%-20%
to our monthly income riding it all the way back to fair value
against the U.S. dollar. And you should, too.
The Canadian dollar raced past 84 U.S. cents this for the first
time since August 1992, thanks to the U.S. dollar sell-off and
bullish comments by Bank of Canada governor David Dodge. Dodge
said that the country's exports are still performing strongly even
as the Loonie (the Canadian's nickname for their dollar) rises.
The Canadian dollar has jumped 10% over the past three months
alone -- a key issue, since exports account for about 40% of the
Canadian economy. But since they mostly export energy and other
important commodities, they CAN absorb the rise.
Now if you owned Canadian Energy trusts like our ChangeWave
Investing subscribers do, you win both ways on the weaker dollar
and strong Canadian dollar. High (12%+) TAX-FREE dividends from
our recommendations have jumped 10% in the last three months
simply because the Canadian dividend buys more when it is turned
into U.S. dollars.
So how would you like an investment that goes up in value as the
dollar declines AND pays you 12%-13% virtually tax free as well?
Be smart about the dollar and don't worry about its crash.
Worry about missing out on such a sweet deal as our Canadian
energy trusts. If you don't have a chunk of those in your
portfolio, you DO have something to worry about.
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Frithiof Andreas Jensen
Guest
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| Posted:
Thu Nov 11, 2004 5:16 pm Post subject:
Re: The Dollar Worrywarts Are Wrong |
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"s_knight8" <s_knight8nospam@hotmail.com> wrote in message
news:cmuo61$gkc@dispatch.concentric.net...
| Quote: | THE KAHUNA'S RANT O' THE WEEK: The Dollar Worrywarts Are Wrong
-- By Tobin Smith
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What an idieet ranter - 'right' or 'wrong' is of no importance, profits are!
Thus far I made about 60% *just* by stupidly dumping my USD broker account
two years ago, and far more by buying Insurance two months after 9/11, Oil
and a few larger Euro-businesses in the crapper: ABB, Ericsson &
Scandinavian Airlines - Crossair went bust, but so it goes.
Easy, really, being wrong.
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