Treasury Secretary Timothy Geithner is once again traveling abroad to assure foreign nations that their investments in the United States are safe But this time it’s not China he’s trying to assure; it’s another large supporter of the dollar: Saudi Arabia.

While inflation has held steady in the face of increasing budget deficits, the purpose of Geithner’s multinational tour will be to repeat assurances that such deficits will not trigger a strong bout of inflation and in turn sink the value of the dollar and foreign holdings. Last month, Geithner was in China – the largest holder of U.S. treasuries – to make the same assurances.

Geithner reiterated the Obama administration’s commitment to protecting the value of the dollar and maintaining investor confidence in the U.S. financial system in an interview broadcast on CNN’s“Freed Zakaria GPS.”

“A strong dollar is in the interest of the United States. Of course, I deeply believe that,” Geithner said. “Our commitment … to the world and of course, the American people, is to make sure we’ll put in place the policies that can sustain confidence in this economy and this financial system.”

While rising unemployment – well beyond what the Obama administration expected – is prompting talk of a second stimulus package, Geither said it’s too soon for that. Only 11% of the $308 billion stimulus funds allocated to discretionary programs will be spent in the current fiscal year, and only half by the end of fiscal 2010,Money Morning reported last week.

“I don’t think that’s [deciding on a second stimulus is] a judgment we need to make now,” Geithner said Sunday on the CNN program. “We can’t really make it prudently or responsibly.”

Assurances from the man in charge of the world’s largest economy are important to those whom have invested in it, but several economists believe the Obama administration needs to do more to address worries about U.S. deficits.

“We have a fiscal policy that will ultimately undermine the value of their holdings and that has got foreign investors nervous,” said Mark Zandi, chief economist at Moody’s Economy.com told The Associated Press. “They are seeking assurances that the U.S. is committed to dealing with its long-term deficit problems.”

Geithner will also discuss with officials from Saudi Arabia and the United Arab Emirates the lack of stability of oil prices, which rallied about 115% to $73 a barrel after falling below $34 a barrel in February. The Commodity Futures Trading Commission (CFTC) last week said it will hold a series of hearings this month and in August to determine whether or not it should place new limits on energy futures contracts.

There’s a good chance that the United States and other economies will start growing again, Geithner said in a Reuters interview.

“In my view there are significant risks and challenges ahead,” he said. “We have a very powerful set of policies in place, coming on stream. I think there is a very good chance we will see the U.S. economy and the world economy get back to recovery, get growing again, over the next few quarters.”

Source: Geithner Takes Dollar Assurances to Mideast ]]> http://www.contrarianprofits.com/articles/geithner-takes-dollar-assurances-to-mideast/19081/feed 0 http://www.contrarianprofits.com/articles/investment-news-briefs-tuesday-june-16-2009/17932 http://www.contrarianprofits.com/articles/investment-news-briefs-tuesday-june-16-2009/17932#comments Tue, 16 Jun 2009 15:45:45 +0000 Money Morning Staff http://www.contrarianprofits.com/?p=17932 Strong Dollar, Falling Oil Prices Send Stocks Down; Homebuilders’ Confidence Dips; IMF Improves U.S. Outlook; Obama Tells Doctors Health Care Changes Needed; Six Flags Bankrupt

• A stronger dollar and falling oil prices helped U.S. stocks to suffer a sharp drop yesterday (Monday), as investors continue to find it difficult to see real signs of an economic rebound, Reutersreported. All three major U.S. indices – including the Dow Jones Industrial Average and the Standard& Poor’s 500 Index, dropped more than 2%. Hardest hit were the shares of energy companies such as Chevron Corp. (NYSE: CVX), which closed down more than 2% at $71.08. The dollar gained against all 16 of its major counterparts currencies, except for the Japanese yen, after Russian Finance Minister Alexi Kudrin said it was too…

The Dow Jones Industrial Average was up 26.2 points, or 0.32% as of 11:00 a.m. today (Thursday), while the Standard & Poor’s 500 Index was up 4.58 points, or 0.52%.

The surge was prompted by an increase in U.S. wholesale prices, which allayed concern over deflation. Producer prices rose 0.3% in April after falling 1.2% in March. Food prices posted the biggest gain, soaring 1.5% – enough to offset a 0.1% fall in energy prices. Excluding food and fuel prices, so-called core-prices climbed 0.1%.

The rise in producer prices accompanied an increase in import prices, which climbed 1.6% in April, the government said yesterday. Producer prices and the cost of imports comprise two of the three major gauges of inflation. The third measure of inflation, consumer prices, is scheduled for release tomorrow.

The rise in U.S. equities was further supported by a solid earnings report from Wal-Mart Stores Inc., the world’s largest retailer. Wal-Mart posted a profit of $3 billion, or 77 cents a share, in the quarter ended April 30, up from 76 cents a year earlier, matching analysts’ forecasts, according to Thomson Reuters.

Net sales for the quarter fell 0.6% to $93.4 billion, but the company blamed that decline on the negative impact of a stronger dollar, which dented international sales. Wal-Mart’s international operating income fell 16.2% to $880 million on an 11.1% drop in sales to $21.3 billion.

However, international operating income at constant exchange rates was $1.13 billion in the three months ended April 30 on sales of $26.1 billion.

“In almost every country we grew the top line faster than the market despite the strong dollar and a recession that is even deeper in some countries than it is in the United States,” said chief executive Mike Duke.

Wal-Mart’s resilience offered a modicum of comfort to the retail sector after a report yesterday showed retail sales fell 0.4% in April, the eighth monthly decline in the last 10 months. Retail sales tumbled 1.3% in March.

Retail sales have been badly battered by a sharp rise in unemployment. And data from the Labor Department today furthered illustrated the frailty of the current labor market.

Initial claims for unemployment rose by 32,000 to 637,000 in the week ended May 9, from a revised 605,000 the week prior, the Labor Department said.

The economy has shed about 5.7 million jobs since the recession began in December 2007. Payrolls fell by 539,000 in April, as the jobless rate climbed to 8.9% – its highest level since 1983.

Source: Producer Prices and Wal-Mart Results Give the Market Edge Over Weak Jobs Data

• The U.S. Federal Reserve said yesterday (Thursday) that it will purchase up to $300 billion of longer-term Treasury securities over the next six months. The Fed will also purchase an additional $750 billion worth of government-guaranteed mortgage-backed securities.  The announcement accompanied its decision to keep interest rates at historically low levels.

• Sources told The New York Times that IBM Corp. (IBM) is in talks to buy Sun Microsystems Inc. (S) for at least $6.5 billion, which would be twice the value of Tuesday’s closing price of Sun’s shares. If a deal if reached, it would be IBM’s largest acquisition and one that would bolster the company’s standing among high-end computer server companies.

• About 1,471 hedge funds shut down last year, exceeding the previous record of 848 by 70%. In the fourth quarter alone, more than half of those hedge funds bellied up. “It’s been a great culling of mediocre managers,” Tammer Kamel, president of Toronto-based Iluka Consulting Group Ltd., which advises clients on hedge-fund investments, told Bloomberg. “Those funds that will be around this year are the ones with the right skill set.”

• Minnesota-based Food maker General Mills Inc. (GIS) posted fiscal third-quarter earnings of $288.9 million, or 85 cents a share. The numbers were below its expectations and caused by the effects of a strong dollar and high costs, Reuters reported.

• The World Bank said that China’s economy is showing “early signs” of stabilization, while forecasted the nation’s economic growth at 6.5%, Bloomberg reported. “The government’s stimulus is working,” said Louis Kuijs, a senior economist at the World Bank in Beijing. “China’s fundamentals are strong enough to ride out this storm.”

• Edward Liddy, chief executive of American International Group Inc. (AIG), has asked employees of the bailed out insurer that took home more than $100,000 in bonuses to return at least half, CNN reported. “It was distasteful to make these payments,” Liddy told members of the House Financial Services subcommittee. “This morning, I’ve asked the employees of AIG Financial Products to step up and do the right thing. Specifically, I’ve asked those who received retention payments in excess of $100,000 or more to return at least half of those payments.”

Source: Global Investment News Briefs Thursday, March 19, 2009

I did something last Friday that I have not done in years and I am embarrassed to admit it. If you live on the East Coast, you know we just experienced a beautiful weekend. After a long, cold winter, a warm breeze was a refreshing reminder spring is just weeks away.

Normally, when my wife gets a craving for ice cream, I mutter my disdain and half-heartedly go along for the ride. I would rather eat a steak over ice cream any day. But when the weather was that nice and the weekend so promising, I jumped on the occasion.

But here is where it gets a little embarrassing. Instead of taking her to one of the trendy ice cream joints in town, I pulled up to the McDonald’s (NYSE:MCD) drive-thru window.

$2.12 later, we had two hot fudge sundaes and were on our way. That’s just about the price we would have paid for handful of sprinkles at any of the other joints.

The price made me happy. The sugar and cream made her happy. It was the start of a great weekend.

Cheap when cheap is good

Multiple my experience by several million people across the globe and you start to see why McDonalds has been making it shareholders rather happy over the last six months. While everybody else is failing, the company’s incredible scale and marketing savvy is keeping it on an level keel even through a hurricane of a recession.

But today the company is warning investors its first quarter may not be as appetizing as the last few. A strong dollar and rising commodity costs are impacting its earnings and its margins. With expectations of Q1 sales to be off by close to $600 million over the same period last year, the company says the adverse currency and commodity conditions will take as much as $0.09 per share off of this quarter’s earnings.

Investors should not be worried about the news. It is certainly no surprise.

February appears to have been a strong month for the company. Overall, global same-store sales rose by a calendar-adjusted 5.4%, helping to prove more folks are flocking to the restaurant’s low-priced menu.

For investors, this is a good time to start looking at shares of the company. While share price is far from joining companies like Citigroup (NYSE:C) and General Motors (NYSE:GM) on the dollar menu, they are quite the value. McDonald’s has not traded this cheaply in nearly two years.

If you are looking to get rich quick, this is not the investment for you. But if you want a shot at double-digit profits and reduced risk, take a look at McDonalds.

Consumers have taken advantage of the low menu prices. Now investors have the opportunity to take advantage of low share prices.

Source: Tightwad Investing: McDonalds rules the value menu

Gold fell more than 2 percent on Tuesday as a stronger dollar dented the precious metal’s appeal as a currency hedge, but the platinum group metals rallied as investors hunted for bargains.

Spot gold was quoted at $846.50/848.10 an ounce at 1444 GMT, down from $858.90 late in New York on Monday. However, it lifted off an earlier low of $838.55 as the dollar trimmed gains against the euro after a raft of U.S. data at 1500 GMT.

U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange were down $10.10 at $847.70.

VM Group analyst Matthew Turner said investors were looking to the currency markets for direction. “A lot of news on physical demand has been quite poor, and that might also be weighing on prices,” he added.

The U.S. currency rose against the euro after a flash estimate of euro zone inflation data came in weaker than expected, increasing pressure on the European Central Bank to cut interest rates.

Analysts said the prospect of an ECB rate cut at the bank’s next interest rate meeting on Jan. 15 was pressuring the single currency, and consequently gold.

A firm dollar reduces gold’s appeal as an alternative investment. However, the U.S. currency trimmed gains versus the euro after data showed U.S factory orders and pending home sales dropped by more than expected in November.

DEMAND FIRM FROM FUNDS

But while the stronger dollar and reports of lackluster jewelery sales weighed on prices, demand for the metal from exchange-traded funds — which issue securities backed by stocks of physical gold — remains firm.

ETF Securities, which operates Europe’s largest gold-backed ETF, said holdings of its Physical Gold exchange-traded commodity rose 2 percent in the week to January 2 to 1.899 million ounces.

Holdings of the world’s largest bullion ETF, the SPDR Gold Trust (GLD), held at a record 780.23 tonnes on Monday.

“Gold is holding (where it is) because of investment demand for gold ETFs, rather than demand from the physical side or as a hedge against the U.S. dollar,” said Commerzbank analyst Eugen Weinberg.

Firmer oil prices, which are holding just below $50 a barrel as supply fears were fuelled by Israel’s incursion into Gaza and a dispute between Russia and Ukraine over natural gas, also lent some support to gold.

Among other precious metals, platinum and palladium rallied to multi-week highs, shrugging off a spate of poor vehicle sales news from car makers, the major consumers of the metals.

Spot palladium was the main riser, climbing 8 percent to a six-week high of $198.50. The metal was later quoted at $194.50/199.50, against $183.50 late in New York on Monday.

Platinum also climbed more than 2 percent to $967.50, its highest level for three months. It was later at $958.50/963.50 an ounce against $946.

“With the commodities basket, people are shifting out of gold and into other commodities that have been under performing lately,” said Commerzbank trader Rory McVeigh. “And palladium is probably the biggest underperformer of the market.”

Spot silver eased to $11.11/11.19 an ounce from $11.22.

LONDON, Jan 6 (Reuters)

Platinum traded up during the NYMEX session, reaching a high of $862.50/oz., before slipping during afternoon trading. Platinum ultimately finished just off its intraday low at $848/oz., down $3.

Silver rose sharply during Far East trading, but posted steady declines for the rest of the day to finish in the red. Silver ended at $10.81/oz., down just $0.01 from Friday’s close.
(Click here for charts)

Gold’s rise was largely the result of weakening dollar and declining equities.

Gold’s trading off the dollar,” wrote Frank Lesh of FuturePath Trading. “A weak economy and all-time low interest rates don’t call for a strong dollar.”

Gold saw further support from investors looking for a safe haven during these troubled economic times.

We’re not going to get any revelations on the economy soon,” Lesh continued. “Those who want to hold gold are still looking at a shaky equity market worldwide.”

Source: Gold Rises on Dollars Weakness

We finally had some data releases here in the US which look to steer the markets, so I’ll just get right to it.

The dollar continued to strengthen yesterday after another round of bad weekly employment figures. Initial jobless claims increased to 516k during the first week of November, and last weeks numbers were revised up to 484k. The employment picture continues to darken here in the US, and it doesn’t look like it will improve any time soon. This is just what the US consumers don’t need right now. Not only are most consumers living paycheck to paycheck, but now many of those paychecks are being ripped out of their hands.

Personal bankruptcies are heading into record territory, and job losses will only make this worse. While the total size of the consumer credit market is dwarfed by the size of the mortgage market, with home loans there is an underlying asset providing some base from which banks can work. Credit card debt is different, the banks and investors who hold this debt have no underlying assets to fall back on. This fact has not been missed by the current administration, and Treasury Secretary Paulson is now looking to spend some of the bailout package to try and help out the consumer lenders. Unfortunately it looks like we will be taking another step into the deep dark area Chuck has continually talked about.

This morning we got the retail sales numbers here in the US which showed a further deterioration. Retail sales less autos were down 2.2% in October, almost double economist’s expectations. This fall is the largest monthly drop ever, and is just one more sign the US economy is heading for a doozy of a recession!

We did get some good news yesterday morning as the trade deficit narrowed somewhat, a result of a stronger dollar and lower oil prices. But even after the narrowing, we are still running a deficit adding to our need to attract foreign investments. Chuck let me have a sneak preview of December’s Review and Focus the other day before he sent it to the printer. In the latest issue, he talks about our need to finance the twin deficits which the US continues to amass. This financing need is one of the factors convinces me the US dollar will have to get weaker. The current dollar strength will not last, and once the ‘flight to quality’ buying of US Treasuries subsides, we will see the US currency return to its long term decline.

As I said earlier, the dollar continued to strengthen yesterday morning as the stock market fell. But both reversed course early in the afternoon after Paulson started talking. The Treasury Secretary said the big 3 auto makers should receive some government help, but he isn’t willing to take any of the funds already approved by congress to help them. Instead, he urged congress to come up with additional funds to help the car makers. He also said he would look to try and spend some of the already approved rescue package on ‘non-traditional’ lenders who give loans directly to consumers. Looks like Paulson is finally realizing what we have been saying for a while now, that the next big crisis is the consumer credit crunch.

Anyway, just after the news came across the wire about Paulson’s remarks, the stock market jumped 400 points and the euro bounced up over two cents in the matter of a few short minutes. The dollar has really become a contra indicator for the risk appetite in the market. The dollar index and the stock market have moved in opposite directions 88 percent of the time since the beginning of September. As investors feel more comfortable with risk, they sell the short term dollar holdings and invest them into other markets. The Europeans have started to take the dollar back up this morning, but it remains lower than at this time yesterday.

The Europeans are taking the euro down after it was confirmed that the European economy fell into its first recession in 15 years during the third quarter. Germany had already reported a third month of negative growth, and the European Union confirmed the GDP shrank .2% in the 15 euro nations during the third quarter. France, Europe’s second largest economy, unexpectedly grew in the third quarter as consumer spending gained and exports rebounded. I am still convinced that while things are bad across the pond, Europe’s economies are still in better shape than the US economy. And while some here in the US have given the ECB trouble about not lowering interest rates as quickly as the US; I believe they have done a better job navigating the current crisis, and Europe will be able to recover more quickly than the US.

And finally, the RBA was in the markets protecting the Australian dollar again. Lately, the RBA is intervening to hold the AUD$ up while there are rumors the Bank of Japan may start intervening to stop the appreciation of the yen. Officials at the Swiss National Bank have also been complaining about the rise of the Swiss franc. Both the Japanese yen and Swiss franc continue to strengthen as investors reverse carry trade positions. So we have a couple central banks intervening to hold their currencies down, and others who are intervening to try and keep theirs from falling further. Crazy Times!!

Currencies today 11/14/08: A$ .6585, kiwi .5595, C$ .8188, euro 1.2671, sterling 1.4738, Swiss .8409, ISK (No Quote), rand 10.152, krone 6.890, SEK 7.894, forint 213.42, zloty 2.9408, koruna 20.015, yen 96.39, baht 34.97, sing 1.5184, HKD 7.7501, INR 49.01, China 6.8250, pesos 12.97, BRL 2.30, dollar index 86.89, Oil $58.25, Silver $9.65, and Gold… $747.24

Source: Data Shows Just How Bad Things Are

But the Fed and Treasury have engineered a strategy to pay off the debt with weaker and weaker dollars. And guess what? So far, so good. Since November 2002, the dollar has fallen against the euro more than 50 percent since its high in October 2000. Of course, this is not the first time we’ve gone through a managed devaluation of the currency. In the 34-year period since Nixon slammed the gold window shut and subsequently ended the Bretton Woods exchange rate mechanism, we’ve had only five major currency trends:

1. Weak dollar 1972–1978 (7 years)
2. Strong dollar 1979–1985 (7 years)
3. Weak dollar 1986–1995 (10 years)
4. Strong dollar 1996–2001 (6 years)
5. Weak dollar 2002– (? years)

The most notable period spanned the 10 years from 1986 through 1995. Then as now, the United States was fighting a historic current account deficit through managed debasement of its currency. But because the present bear market only began in February 2002, the current cycle looks like it still has a number of years to run.

In the best-case scenario, if the current bear market follows the trajectory set by the 1986 — 1995 slump, we could see a weakening dollar for up to 10 years. This presents an opportunity for selling the dollar in one of four ways: direct and indirect speculations, using short- and long-term options for each. These plays will help you safely position your money outside the dollar bear market. And you stand to make a fair amount of money, too.

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Using the “Off Switch” to Shut Down Alzheimer’s and Huntington’s Diseases, Too

It turns out the “off switch” discovery could have lots of uses beyond radically improving a patient’s chances of beating cancer.

For instance, take Alzheimer’s. Right now, there’s no cure.

But imagine the implications — for both victims and medical investors — if this same breakthrough could be used to reverse Alzheimer’s symptoms in just weeks.

Check it out here…

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But there is great danger ahead. Since the trade deficit passed the $759 billion mark — 6.3 percent of GDP — foreigners now must shell out about $1.5 billion a day just to keep the dollar afloat. And even during the managed dollar decline of 2003, the trade imbalance continued to grow. In 2005, Stephen Roach, Morgan Stanley’s chief global strategist, predicted that the current account deficit at the time was on course to reach $710 billion — 6.5 percent of GDP. He was short by only a few billion.

Herein lies the drama. The Bank of Japan spent the equivalent of $187 billion in 2003 — and $67 billion in January 2004 alone — in a bid to prevent its strengthening currency from choking off the country’s export-led recovery. In dollar terms, the Bank of Japan is now spending more than $1.5 billion every day trying to keep the yen from strengthening against the greenback.

Over a four-week period in the fall of 2003, combined foreign central bank purchases of U.S. securities topped $40 billion, more than $2 billion every trading day. Yet these central bank billions managed merely to limit the greenback’s decline to just 2.3 percent over the same period. Can you imagine what would have happened if the banks hadn’t pumped that money into the Fed’s reserves? One former currency trader has asked, “If $40 billion cannot bring about even a minor rally, just how weak and despised is the once — almighty dollar?”

We have relied on the kindness of strangers for too long. “We’re like the untrustworthy brother-in-law who keeps borrowing money, promising to pay it back, but can never seem to get out of debt,” Jim Rogers writes. “Eventually, people cut that guy off.”

There is no way the United States can possibly pay off its creditors should they decide to cash in their IOUs. Right now, the United States holds only about $70 billion in reserves against its obligations — much less than 2005’s $87 billion. That would last about three minutes should creditors begin to sell the dollar, rather than trying to support it.

It’s hard to imagine, isn’t it? The world’s reserve currency spiraling downward, out of control. But then, that’s what the British must have thought in 1992 when they attempted to manage a devaluation of the pound. Despite the Bank of England’s best efforts, sterling got away from them; the currency collapsed and Britain was kicked out of the Exchange Rate Mechanism (ERM) established to pave the way for the euro. On that day, known as Black Wednesday in Britain, currency speculator George Soros is rumored to have made as much as $2 billion. Don’t be surprised if more fortunes emerge in the future as the dollar slips dangerously close to free fall.

By flooding the system with liquidity, the Fed cannot control the value of the U.S. dollar against foreign currencies; nor can they control its purchasing power — at least not indefinitely. The Fed’s current policies can “give the majority of investors the illusion of wealth as asset markets appreciate,” wrote Marc Faber in November 2003, “while the loss of the currency’s purchasing power is hardly noticed. This is particularly true of a society that has a very large domestic market, where 90 percent of the people don’t have a passport and therefore know little about what is going on outside their own continent. And where the import prices of manufactured goods are in continuous decline because of the entry of China, as a huge new supplier of products with an extremely low cost structure, into the global market economy.” If that’s the case, you should look at any declines in the dollar as an opportunity to make some money.

The dollar is the single biggest element of risk in the world of finance today. Rearrange the current system of world finance ever so slightly, let confidence in the greenback falter, and the mighty dollar could go up in flames. There are many ways to hedge against this risk. Better still, there are many ways to profit from the likelihood the dollar will fall. Some methods are direct, some indirect. Some are leveraged, some unleveraged. There is a methodology for every taste, but before explaining the specifics, we ask: What ails the dollar?

The dollar is a victim of its own success. It is America’s most successful export ever — more successful than chewing gum, Levi’s, Coca-Cola, or even Elvis Presley, Britney Spears, and Madonna put together. Trillions of dollars flow through the global financial markets every week, and they are readily accepted at large and small — and clandestine — business establishments from Kiev to Karachi.

Today, there are simply too many dollars in circulation for the currency’s own good. Why? Americans have been living beyond their means for more than two decades. The U.S. dollar’s problems stem from a single cause. “If there’s a bubble,” wrote David Rosenberg, chief economist at Merrill Lynch,” it’s in this four-letter word: debt. The U.S. economy is just awash in it.”

You’ve seen it firsthand: John Q. Public now holds more credit cards and outstanding loans — with a higher and higher total debt load — than ever before. Outstanding consumer credit, including mortgage and other debt, reached $9.3 trillion in April 2003 — a significant increase from its $7 trillion total in January 2000 — but by the third quarter of 2007, debt had nearly doubled since 2000, to $13.7 trillion. With consumer spending alone responsible for approximately 70 percent of U.S. GDP, that’s quite a hefty personal debt load.

The corporate debt picture is no better. American companies have never depended so much on sales of their corporate bonds. Between 2002-2007, investment-grade corporate bond sales increased nearly 60 percent, growing from $598 billion to $951 billion. But junk bond sales for that same period broke the bank, surging from $57 billion to $133 billion.

The third leg of the debt problem, following consumer and business debt, is Uncle Sam. Government debt as of November 7, 2007, officially passed $9,000,000,000,000. That’s about $30,000 for every man, woman, and child in the country. This total includes debt owned by many types of investors, from individuals to corporations to Federal Reserve banks and especially to foreign interests. (By 2004, foreign central banks had stockpiled more than $1.3 trillion worth of dollar-denominated Treasury bonds and agency bonds at the Federal Reserve. By 2007, foreign debt had nearly doubled, to $2.033 trillion.)

What the $7.8 trillion figure does not account for are items like the gap between the government’s Social Security and Medicare commitments and the money put aside to pay for them. If these items are factored in, the government debt burden for every American rises to well over $175,000. In 2005, the Methuselah of investment mavens, Sir John Templeton, then 93, said you should get out of U.S. stocks, the U.S. dollar, and excess residential real estate. Templeton believed the dollar would fall 40 percent against other major currencies, and that this would lead the nation’s major creditors — notably Japan and China — to dump their U.S. bonds, which would cause interest rates to run up, thus beginning a long period of stagflation. He was right.

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The Slow-Motion “Black Monday” Ahead

Here’s a picture for you: If the market today falls as fast and as far as it did in 1987, you’ll see more than 3,000 points erased from the Dow alone. In a single day.

Could it happen?

Banks hold the same blue chip shares you’ll find parked in your retirement fund. When the “level three” losses get declared, those same banks might have to start dumping those shares to raise cash. And that could send these blue chips…along with most of the rest of the stock market…into full-scale collapse.

I urge you to take the seven steps outlined for you in your free Strategic Financial Survival Library. Click here to reserve yours…

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Don’t let his age fool you — Templeton was still sharp in 1999 when the financial industry hacks in Florida were urging their customers to buy more tech stocks. Templeton warned that the bubble would soon burst. He was right; they were wrong. Of course, he was only 87 back then. He is almost certainly right again. Other great investors, too, are getting out of the dollar. For the first time in his life, Warren Buffett is investing in foreign currencies.

George Soros, who made a fortune selling sterling in the 1992 ERM crisis, warns that the U.S. system could “blow up” at any time. Richard Russell, the influential editor of the Dow Theory letters, speaking at the New Orleans Investment Conference, warned: “If ever there was a crisis that could shake the global economy — this is it.” Jim Rogers is teaching his daughter to speak Chinese. When old-timers nod their heads in agreement — especially when they happen to be the most successful investors in the world — their advice may be worth listening to.

American consumers, companies, the U.S. government, and the country as a whole owe more dollars to more people than ever before. But perhaps the greatest threat to the U.S. economy is its foreign creditors. There is — or should be — a limit to the number of dollars foreigners are willing to buy and hold and thus a limit to their willingness to service our credit habit. Why? Because the United States, while still the world’s number — one economic power, is showing itself to be an unreliable steward of its own currency.

Regards,
Addison Wiggin

Source: How to Sell the Dollar

Zinc declined the whole day, barely coming off its lows to end at $0.8363/lb., down 2½ cents. Aluminum was modestly lower, shedding a bit more than a third of a cent, to $1.3145/lb., while lead’s freefall shows no sign of ending as it dropped another penny and two-thirds, to $0.823/lb.

Copper was weak in the wake of the rising dollar.

“The stronger dollar is impacting prices for copper today,” said Patrick Chidley, an analyst at Barnard Jacobs Mellet in Stamford, Connecticut. “Copper looks set to continue to fall.”

Traders are taking note of all the talk about the possibility of increased interest rates in order to support the dollar and fight inflation.

“The Fed should be much more willing to act to keep the economy going and prevent it from entering a recession,” Chidley said. “If they go ahead and start raising rates, that’s not going to happen. They run the risk of putting the U.S. into a recession, and that’s going to affect copper very negatively.”

But nickel rose to a three-week high after BHP Billiton, the world’s third-largest producer of the metal, said it will shut down an Australian smelter and refinery that produces about 2% of world supply.

BHP announced that it will rebuild of the Kalgoorlie smelter furnace, reducing nickel sales by 28,000 metric tons.

“It’s a positive driver for the market,” said Adam Rowley, an analyst at Macquarie Group in London. “With the disruption in Australia, nickel is moving to a balance from a surplus.”

The Kalgoorlie closure followed word from Minara Resources, Australia’s second-largest nickel producer, that it was cutting its output forecast by as much as 23%.

Supply may be an ongoing concern, as nickel inventories monitored by the LME have fallen 8.2%, to 47,220 tons, since April 30.

Source: Strong Dollar Hits Most Base Metals - But Nickel Rallies on Smelter Closure