Thoughts on Markets

Tuesday, July 17, 2007

Commodities, Including Gold & Oil Back in Business

That is, the business of mountain climbing. Oil is well above $70 and gold is currently at $666 indicates higher prices maybe even before the fall. The options on XLE (energy index) continue to increase in value. I believe they will go higher, particular those with December and January expiration dates. Mine are performing nicely for which I daily thank the Lord.

Gold must rush above $670++ to be well on its way higher. The mining stocks are riding this wave, too. I like the US Global Investors World Precious Metals mutual fund for those not interested in individual stock investing. Their World Natural Resources mutual fund seems to be good for commodities.

You are the one most interested in your investment success. Therefore, prepare yourself and make your own decisions.

On the currencies, the Pound Sterling hit a 26 year high at 2.0445 dollars to the Sterling. The Euro now commands 1.3768 dollars. Certainly, the dollar is under pressure as it continues its decline in purchasing power. By the way, in case you missed it, Iran has asked Japan to use yen, rather than dollars, to purchase its oil. Though the impact here is small, it is evidence of a trend away from the dollar. The commodity currencies of Canada, Australia, and New Zealand look quite attractive as the commodities climb the mountain of price.

China is rapidly growing in economic power. Their inflation seems to be somewhat under control as the Yuan slowly appreciates in value.

Richard Russell of the Dow Theory Letter believes that we may be in the early stages of the 3rd phase of the general market. This is the heating of the air in the balloon followed by the eventual bursting. He has been in the business a long, long time and could be correct. I would use caution and use close trailing stops on general stocks to protect profit and/or limit losses if he is correct. On the other hand, there is a lot of liquidity out there and it seems to continue its flow into the general stocks.

There was news that some central banks and governments could be investing in ETFs or mutual funds concentrating upon the "best" and "safest" larger blue blood stocks. Most of these are well situated internationally across most boundaries. If true, this could be a source of continued flow of the current excess liquidity into the general markets of the world. Thus, extending the upward life of these markets. Be careful if you intend to ride the wave. Remember, trends continue until they end.

Trust in the Lord always and give Him the thanks and glory for everything that is and that comes into your lives. Obey Him and rejoice in Him always.

Best to each, Doug

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