Dollar Headed Down
I have been procrastinating on posting of late. There is a good bit of news which is turning into bad news for our dollar. Here is some of the latest from the Daily Pfennig (Everbank World Markets - www.everbank.com).
"Ty Keough pointed out an article yesterday which appeared on Bloomberg.com with this headline "OPEC Dumps $10.1 Billion of Treasuries as Oil Tumbles". It looks like OPEC nations are unloading Treasuries at the fastest pace in more than three years as crude oil prices tumble. Over the last several years, the big oil exporting nations have purchased massive amounts of US debt with the Petrodollars they have earned from record high oil prices. As oil prices have sold off, these countries have reduced their holdings of US treasuries. According to the Bloomberg article, for every $10 drop in the price of a barrel of oil, OPEC members adjust Treasury holdings by about $34 billion.
When you combine this reduction of available 'petrodollars' with Asia's focus on diversification it does not bode well for the US$. Last year, the Asian monetary authorities, together with the central banks and state investment agencies in oil-exporting countries, bought about $770 billion in foreign-currency assets. These official purchases financed most of the estimated $870 billion US currency account deficit in 2006, according to research by the Federal Reserve Bank of NY. If the petrodollar surpluses dwindle, the job of sustaining US consumption will fall squarely on the Asian central banks who have already stated a desire to reduce exposure to the US markets. This is not shaping up to be good news for the US$!"
We are also seeing a gold revival following the recent correction. For the last 24 hours gold hit a high of $643.20 and a low of $632 yesterday. It is currently at $643. Thus, it seems increasingly more important to hold on to precious metals, mining stocks, and the ETFs or other funds which invest in the precious metals to preserve purchasing power.
Almost all of the mining stocks have gains. It might be well to put in some 10-15% trailing stops on those in your portfolio with big gains. This will preserve much of the gain and give opportunity for further gains.
DRD Gold (DROOY) is still languishing a bit from the recent bad news. Hopefully, this is over for now and it will begin to have greater favor in the market. By the way, have you seen how Silver Standard (SSRI) has remained above Pan American Silver (PAAS). For a long while the prices were reversed. About 12-18 months ago SSRI put a good bit of cash reserve into the metal. I wonder if that does not explain the difference.
The outlook for the "new" Congress is still unclear. I am glad that I am not in any major position in the government. I am perfectly willing to acknowledge that the Lord Jesus Christ is in control. His are perfect hands as is His exercise of control. Take great comfort in this as man makes many mistakes in arrogance while our Heavenly Father sits back in derision at the folly of man.
Best to each, Doug
"Ty Keough pointed out an article yesterday which appeared on Bloomberg.com with this headline "OPEC Dumps $10.1 Billion of Treasuries as Oil Tumbles". It looks like OPEC nations are unloading Treasuries at the fastest pace in more than three years as crude oil prices tumble. Over the last several years, the big oil exporting nations have purchased massive amounts of US debt with the Petrodollars they have earned from record high oil prices. As oil prices have sold off, these countries have reduced their holdings of US treasuries. According to the Bloomberg article, for every $10 drop in the price of a barrel of oil, OPEC members adjust Treasury holdings by about $34 billion.
When you combine this reduction of available 'petrodollars' with Asia's focus on diversification it does not bode well for the US$. Last year, the Asian monetary authorities, together with the central banks and state investment agencies in oil-exporting countries, bought about $770 billion in foreign-currency assets. These official purchases financed most of the estimated $870 billion US currency account deficit in 2006, according to research by the Federal Reserve Bank of NY. If the petrodollar surpluses dwindle, the job of sustaining US consumption will fall squarely on the Asian central banks who have already stated a desire to reduce exposure to the US markets. This is not shaping up to be good news for the US$!"
We are also seeing a gold revival following the recent correction. For the last 24 hours gold hit a high of $643.20 and a low of $632 yesterday. It is currently at $643. Thus, it seems increasingly more important to hold on to precious metals, mining stocks, and the ETFs or other funds which invest in the precious metals to preserve purchasing power.
Almost all of the mining stocks have gains. It might be well to put in some 10-15% trailing stops on those in your portfolio with big gains. This will preserve much of the gain and give opportunity for further gains.
DRD Gold (DROOY) is still languishing a bit from the recent bad news. Hopefully, this is over for now and it will begin to have greater favor in the market. By the way, have you seen how Silver Standard (SSRI) has remained above Pan American Silver (PAAS). For a long while the prices were reversed. About 12-18 months ago SSRI put a good bit of cash reserve into the metal. I wonder if that does not explain the difference.
The outlook for the "new" Congress is still unclear. I am glad that I am not in any major position in the government. I am perfectly willing to acknowledge that the Lord Jesus Christ is in control. His are perfect hands as is His exercise of control. Take great comfort in this as man makes many mistakes in arrogance while our Heavenly Father sits back in derision at the folly of man.
Best to each, Doug
posted by Doug @ 8:47 AM
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