What's Really Driving Obama's Sudden Interest in Oil
U.S. President Barack Obama generated a lot of hubbub with his decision to open up parts of the Atlantic Ocean and Gulf of Mexico to oil drilling.
We've all heard the criticisms that some of the geological surveys are as much as 30 years old, and the arguments that the ecological impact of drilling off the U.S. East Coast isn't worth the accessible oil, which some critics estimate could play out in as little as six months at current demand levels.
But even after more than a day of debate over the motivations for - and possible results from - President Obama's apparent energy policy about-face, one thing is very clear: This announcement has nothing to do with oil.
It's all about the U.S. dollar.
To find out why President Barack Obama really lifted the moratorium on oil drilling, please read on...
Here's What a Veteran Trader Sees for Gold Prices…
Gold has made some dramatic moves in the last 18 months and we expect it will undergo some equally dramatic moves in the future.
But not right now.
While I recognize that gold is one of the few "commodity" markets that people are really passionate about, the purpose of this article is not to take sides either with the gold bugs or those who reject the argument that gold is "forever." Rather, I want to discuss my interpretation of the market's cycle.
After spot gold made an all-time high against the dollar at $1,226.37 on Dec. 2, gold has been in "retreat" mode. For the past several months, gold has been in a broad trading range, seemingly unable to move one way or another. This process has created frustration among bulls and bears alike.
Here is the dirty little secret about the gold market: It can be a horrible investment and here's why...
- Chinese Premier Wen Rejects U.S. & European Pleas, Says Yuan to Stay Stable China's Premier Wen Jiabao vigorously defended his country's economic policies on Sunday, rejecting calls to let the yuan appreciate, and ratcheting up trade tensions with the United States where lawmakers and economists insist his stance is hindering a global recovery. "I don't think the renminbi is undervalued," Wen said at a press conference in Beijing, using the Chinese currency's official name. "We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency." Read More...
China Standing Firm on Currency Policy Despite Mounting Pressure
China's rigid stance to not appreciate its currency continues to cause problems with "hot money" and foreign trade relations.
A report from Yi Gang, China's director of the State Administration of Foreign Exchange (SAFE), today (Tuesday) shrugged off calls for currency appreciation. Yi said China's foreign-exchange reserves - which are the largest in the world at $2.4 trillion - are safe and stable, and the country will strengthen its supervision of speculative cash inflows.
Speculation that China's currency, the yuan, is soon to rise has increased investment, but such speculation is not particularly welcome. "Underground money shops" disguise funds as foreign direct investments and trade accounts in an attempt to profit from the increasing spread on interest and exchange rates, according to Yi.
Plummeting British Pound Leads to Worries of Another Currency Market "Black Wednesday"
Outside of the earthquake rescue efforts in Chile and the Greek-rescue efforts in Brussels, the big news in the world economy last week occurred in currencies.
As you can see in the chart below, the plummeting British pound sterling has dropped even more than the beleaguered euro in the past month and a half, while the good old U.S. dollar has been as good as gold. (That last bit was a bit of currency irony; the dollar has actually been much better than gold, which has flat-lined in the past six weeks.)
Weak Job Market and Low Inflation Stall Fed's "Exit Strategy"
Any speculation that U.S. Federal Reserve Chairman Ben Bernanke had his finger on the "exit strategy" trigger has been silenced.
Bernanke yesterday (Wednesday) faced the House Financial Services Committee to instill public confidence in the Fed's ability to exercise a smooth exit strategy and quell continued fears of a tightening monetary policy.
The Federal Open Market Committee (FOMC) "continues to anticipate that economic conditions -- including low rates of resource utilization, subdued inflation trends, and stable inflation expectations -- are likely to warrant exceptionally low levels of the Federal Funds rate for an extended period," he said.
How the Looming "Debt Bomb" Will Crush the Dollar
The U.S. dollar has staged a short term rally against other currencies. But the U.S. is already gripped by hidden inflation and must refinance a mountain of short-term debt in just months.
Here's how to protect - and grow - your money, even as the debt bomb explodes... Read More...
The Five Factors That Could Rescue U.S. Stocks
When the stock market is enduring as much trouble as it has been lately, it pays to remember that there are still many positive catalysts that are in place and working to buoy securities prices.
Let's take a few moments to consider the top candidates:
- A Friendly Fed: The current U.S. Federal Reserve under Chairman Ben S. Bernanke is the most accommodative in history and is likely to keep short-term interest rates at or near zero for the remainder of this year. Occasionally there will be rumblings of an increase - as there was in The Wall Street Journal last Monday, but they are likely just smoke screens.
Seven Signs of the Fed's Eventual "Exit Strategy"
Looking for an exact date when U.S. Federal Reserve Chairman Ben S. Bernanke and his fellow central bank policymakers will raise interest rates?
Experts refer to this eventuality as Bernanke's "exit strategy" - a financial euphemism for the interest-rate increases that are certain to come ... at some point.
That's just it - those experts can't tell you when that exit strategy will begin. I can't tell you that, either (Sorry, loaned my crystal ball to Miss Cleo for her new infomercial).
But what I can give you that the pundits can't is a "Road Map to Higher Interest Rates," which spells out the specific events that should precede the most-heavily anticipated U.S. central bank interest-rate increase in history. Follow it and you should be perfectly positioned to profit when the time comes.
(Remember, a few months ago, I introduced Senior Secured Floating Interest Rate Bonds, or SSFRs, an investment that you'll want to own when interest rates rise.)
So, without further ado...
Buy, Sell or Hold: Buying Into Brazil by Betting on Vale (NYSE: VALE)
On Oct. 27, 2008, I strongly recommended that Money Morning readers invest in the Brazilian stock market through the iShares MSCI Brazil Index Fund (NYSE: EWZ).
It was a momentous decision. The U.S. economy and the global financial system seemed to be coming to a precipitous end.
The day before Money Morning published my lengthy analysis and recommendation, The New York Times published an editorial by the newly anointed economics Nobel laureate Paul Krugman, entitled "The Widening Gyre." Krugman in that editorial criticized those of us who believed emerging economies would decouple from the financial melee that was wrought by the over-leveraged and imbalanced developed economies.
"The really shocking thing, however, is the way the crisis is spreading to emerging markets - countries like Russia, Korea and Brazil," he wrote. And he derided the notion of "the supposed ability of emerging market economies to keep growing even if the United States fell into recession.... Now the emerging markets are in big trouble."
- Why Gold Beats the Market Manipulators There's one investment that Wall Street manipulators can't touch - and neither can the Fed or the U.S. government. Right now, that investment is gold. Taking a stake in a hard asset like gold may well be the surest way to make some money for yourself despite the shenanigans on Wall Street. Read More...
- Investment News Briefs With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world. Top AIG Lawyer Quits Over Pay Restrictions, Gets Millions in Severance; Biggs & Faber: S&P 500 Has Room to Run, Dollar Will Rebound; Consumer Confidence Rises for Second Month in a Row; U.S. Home Prices Unchanged in October; China Audit Finds $35 Billion in Fraud by Officials; GM Holds Fire Sale on Remaining Pontiacs and Saturns; Oil Moves Closer to $79 Outgoing American International Group Inc. (NYSE: AIG) General Counsel Anastasia Kelly will get "several million dollars" in severance after she quit over federal pay curbs, people familiar with the matter told The Wall Street Journal . Kelly was entitled to the money under AIG's severance plan, which says certain executives can resign and collect severance if their pay is significantly reduced, the people said. Kelly's pay stood to take a large hit after the Obama administration "pay czar" Ken Feinberg capped annual salaries at $500,000 for executives at companies that received billions in bailout money. The exact amount of severance was not specified. Hedge fund manager Barton Biggs and contrarian investor Marc Faber both said in an interview with Bloomberg Television that the dollar and the U.S. equity market may gain up to 10% in the next two years. "History would suggest that after such a severe economic shock like we've just had that the odds are that we're going to have a pretty good burst of growth in 2010, 2011," Biggs said. "I don't see any reason why we can't have a further rally in the dollar and a further rally in stocks. And my guess is that the next move in both could be on the order of 10%." Both Biggs and Faber recommended investors buy U.S. stocks on March 9, 2009 when the Standard & Poor's 500 Index was at its lowest point in 12 years. Read More...
How to Profit From the Oil-Price Spike of 2010
Oil prices staged a remarkable rally this year on the back of a weak dollar and a nascent economic recovery. In 2010, it's likely that these same factors will combine with an increase in global energy demand to push oil prices back up over $100 a barrel.
With stockpiles still high and energy demand rebounding sluggishly, most forecasts are calling for the "black gold" to edge up into the low-triple-digit price range. That's 40% higher than where oil is trading right now - but is still well below the record high of nearly $150 a barrel that was established in 2008.
Money Morning Chief Investment Strategist Keith Fitz-Gerald is even more bullish. He believes that a price of $100 a barrel is "easily attainable" and says that some sort of unforeseen market shock could cause crude oil to spike as high as $150 barrel by the end of 2010.Read More...
Could a Spike in Bond Yields Cause the Economy to Stumble in the New Year?
In normal times, at their most basic level, bond prices follow some very simple laws of financial physics: When interest rates rise, bond prices fall and bond yields rise; when rates fall, bond prices rise, and bond yields drop.
However, bonds could break those laws of financial physics in the New Year - and in a big way. That could inflict some real financial pain on the U.S. recovery, the dollar, the shuddering housing market - and could even ignite a major stock-market reversal.
The U.S. Federal Reserve continues to hold rates on U.S. Treasury securities to artificially low levels - a strategy central bank Chairman Ben S. Bernanke just this week said the Fed intends to adhere to for the foreseeable future. Read More...