Japan and the USA
Stocks were up 100 points at the start and most of the day, but ended down 53 points.
Bonds rallied (lower interest rate) as the FED intervened in the 7 year Treasury auction and bought themselves.
The Dollar went much lower today, but I’m hoping it turns around tomorrow and starts coming back stronger – we’ll see.
Gold broke out today, and is up to a new 7 week HIGH.
Oil jumped on demand by other nations, and this is a big inflationary threat to America – and you can measure it at your local gasoline pump.
In the news today…..
AIG – Geithner today said that we’ve lost our shirt putting money into AIG, and we aren’t going to unravel that mess for a long time. He didn’t use those words, but that’s what he meant. He said the government didn’t have the power to tell AIG to negotiate its payments to the people who it has paid Billions to – no the government just couldn’t get into that negotiation. Huh?? Are we talking about the same government that’s rearranging GM?
California – yesterday the voters rejected any increase in taxes to pay for their budget problems. Coincidentally, the governor of CA was in DC to celebrate the new car standards set by Obama which matched CA’s 7 year old standards. I don’t believe in coincidences, and I think the US government will bail out California with YOUR dollars. This is okay if you live in CA, but not if you don’t. Of course every other state (except Alaska) will line up at the trough for bailout bucks too.
FED GDP Projection – has been reduced again. This time the FED thinks the GDP for 2009 will be – 1.3% to – 2.0%. This was revised from a – 0.5% to – 1.3%. The FED has now raised their unemployment projection to possibly 10% from 8.8% – pretty good as the current unemployment is 8.9%.
Tonight’s Dinner Conversation…..
Japan’s GDP – was down 15.4% in the 1st Q, annualized. This is far worse than anyone could imagine a year ago. Could this happen to America? – I’ll leave that to you to ponder. How did this happen? Well, obviously people aren’t buying things that Japan makes and exports – as Japan is an exporting nation, and the majority of its industrial goods go overseas. But, more hidden from the scenes is the fact that Japan’s currency, the Yen, is VERY strong, and this means that goods made in Japan are not falling in prices overseas, but are RISING. This only makes the exports from Japan more difficult to sell.
What’s the lesson for Americans? Well, the FED and Treasury and President say they want a STRONG Dollar. Should we trust their statements? Personally, I don’t. The Dollar has rallied over this last 6 month crisis, but more recently, it appears to have started to fall again – which is its long term trend. Also, what works best for the over-spending Congress? – a deflated Dollar (meaning a strong dollar), or an inflated Dollar (meaning a weak dollar)? We are printing money like NEVER BEFORE – that is a fact and TRUE statement that you can ignore at your own peril. The government has NO OPTIONS left to solve its overspending, and ambitious FUTURE spending programs. Inflation is the easy way out for our current administration.
Foreign government are stopping to use Dollars as the “Reserve Currency”. They are fleeing the Dollar with or without the US Government’s permission – you see the Bretton Woods Agreement says that ALL foreign nations must use the Dollar for trade. But, there are tons of nations NOT using the Dollar TODAY. China and Brazil just signed a bi-lateral deal to begin trade in Chinese and Brazilian currencies. The OPEC nations are talking about an OPEC currency, or basket of currencies, to be used for all future oil purchases.
What does all this mean for the Dollar? It means that the Dollar will become devalued against all other currencies. When could this happen??? It could start soon, as more and more nations start to bail out of the Dollar trading. Also, nations are sitting on a bunch of US Dollar assets (like Treasuries) that they would consider selling when the Dollar starts tanking.
How do YOU protect yourself? If you can, get some of your assets out of Dollars. Buy a stronger currency. Some of those currencies today are the Swiss Franc, Norwegian Krona, Australian Dollar and New Zealand Dollar. Do some careful research before you make your choice of currency.
How can you invest in a foreign currency? One way is to just exchange Dollars into that currency. Another way is to purchase an asset denominated in that currency – like bonds (pays interest – sweet) or stocks or ??? Most brokers provide this service.
Here are the last numbers for today:
Dow Jones 30 Industrial – 8421 (down 53 points)
10 Year Treasury Bond – 3.20% (up 0.04%)
Euro – $1.3770
Gold – $937 (up $11)
Oil – $62.04 (up $1.94)
Gasoline $1.81 (no change)
