Makes me sick.
Earlier this year, I believe a conscious decision was made to sacrifice the US Dollar in an effort to rescue the troubled economy.
Despite assurances from Treasury Secretary Geithner (“Financial Times” May 21, 2009) that a strong US Dollar remained a priority, the US Dollar continues to devalue against many other world currencies. Geithner told the House of Representatives his “basic obligation is to make sure that we put in place policies that sustain confidence in this economy, in our currency, that we sustain a strong dollar, that we retain what is a great strength and asset to this country, which is the most deep and most liquid markets for Treasury securities in the world”.
Meanwhile the US Dollar continued to devalue.
As of May 30, 2009, the exchange rates of the US Dollar compared to some other world currencies and gold are listed below. (Source: xe.com – a currency conversion site)
1 Euro = 1.41366 US Dollars
1 Canadian Dollar = .917180 US Dollars
1 Australian Dollar = .800769 US Dollars
1 Swiss Franc = .937302 US Dollars
1 Brazilian Real = .506945 US Dollars
1 Ounce Gold = 980 US Dollars
Compare those numbers to numbers from just two and a half months ago (March 15, 2009) and note the change:
1 Euro = 1.29342 US Dollars US Dollar Down – 9.29%
1 Canadian Dollar = .78661 US Dollars US Dollar Down -16.59%
1 Australian Dollar = .65864 US Dollars US Dollar Down -21.57%
1 Swiss Franc = .84409 US Dollars US Dollar Down -11.04%
1 Brazilian Real = .43678 US Dollars US Dollar Down -16.06%
1 Ounce Gold = 931.25 US Dollars US Dollar Down – 5.23%
This “quantitative easing” (“fedspeak” for printing money in an effort to seed the financial system) is beginning to cost us. And, in spite of the fed’s efforts, its worst nightmare, deflation, is persisting as the Chicago Report recently confirmed. Released on May 29, 2009, the report, which measures several areas of the economy, confirmed prices are continuing to fall even though the fed is furiously pumping money into the economy.
Bottom line in my view – the fed’s actions to stimulate the economy aren’t working and the US Dollar is being devalued in the process. Look for this trend to continue long term, if the fed continues its policy of quantitative easing, and gold prices to continue to rise.
In my opinion, the actions of wise folks in this type of market can best be summed up with the following acronym: R.A.P.
Raise cash on rallies
Use Absolute returns* money management methods
Own some Precious Metals
Securities offered through USA Advanced Planners (Member FINRA/SIPC). Advisory services offered through USA Wealth Management. USA Advanced Planners and USA Wealth Management are affiliated companies. The opinions expressed herein are those of the writer and not necessarily that of the above noted affiliated companies. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted.
· Absolute return portfolios ideally look to generate positive returns whether the overall market is up or down. No investment strategy is 100% accurate. Investing in market related securities involves a risk of principal loss. Prior to making any investment decision, the services of an appropriate professional should be sought as investment related recommendations are dependent upon the personal financial situation of each individual investor.
