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Cash in on This "Invisible" $33 Billion Business

U.S. defense contractors don’t make a habit of sending “thank you” letters to America’s enemies.

But if they did, the corporate leaders at The Boeing Co. (NYSE: BA) might want to look up Vladimir Putin‘s address – before running to the Hallmark store.

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  • U.S. Dollar

  • Money Morning Mailbag: With Many Ways To Hold It, Investors Need To Get Their Hands on Silver A couple weeks ago, Money Morning Guest Writer Jack Barnes examined the last major commodity to enjoy a true price breakout: silver.

    Barnes detailed why silver is poised for a breakout, based on its current price surge underway in India, the price run up of gold - a leading indicator of silver prices - and the fact that the white metal has yet to set a new nominal record price in U.S. dollars.

    Barnes outlined the actions investors should take to involve silver in their investment plans, offering three strategies: physical acquisition and accumulation, exchange-traded funds (ETFs) and stocks, and options on futures.

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  • What's In a Name: Can the U.S. Afford to Call China a Currency Manipulator? It seems like every six months the debate over China's currency, the yuan, reaches a fevered pitch: The Washington bureaucrats threaten to label China a "currency manipulator" and Beijing threatens to dump its U.S. debt holdings.

    Then, with the imminent approach of a major inflection point - be it a key international summit or major financial report - both sides grudgingly agree that a modest appreciation of the yuan would be mutually beneficial.

    However, things could be slightly different this time around. China has routinely ducked calls to revalue its currency, and in doing so greatly agitated the West.

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  • Japan's Move To Push Down Yen Gives Its Exporters a Boost Against Global Rivals Japan yesterday (Wednesday) intervened in the currency market for the first time since 2004 to weaken a surging yen that reached a 15-year high against the U.S. dollar - and the government intervention is expected to continue.

    The Japanese yen hit 82.88 against the dollar, alarming the country's officials who are worried that the rising currency would cut into exporters' profits. The yen had risen more than 11% since mid-May.

    "We can't overlook these movements that could have a negative effect on the stability of the economy," Finance Minister Yoshihiko Noda said Wednesday. "We will continue to watch developments in the market carefully and we will take bold actions including further intervention if necessary."

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  • Investing in Silver: Three Ways to Profit From the Projected Breakout It's the last major commodity to enjoy a true price breakout, and it's already doing so in a foreign currency.

    This commodity has yet to break out in U.S. dollar terms, although its breakout in India is a signal that it's time for U.S. investors to make their move.

    I'm talking, of course, about silver.

    Silver is trading at just under $20 an ounce right now. I think it could hit $50 an ounce by the 2012 presidential election, which would represent a 150% move from here.

    Clearly, the "white metal" can be a major profit center for your portfolio during these uncertain times. Let's look at the strategy that I've put together for you to reap that gain.

    For a look at the author's detailed silver strategy, please read on... Read More...
  • What to Expect on Wall Street as Nervous Investors Navigate a Slowing Economic Recovery Wall Street was hit hard last week with gloomy data that has kept buying interest stalled and investors spooked over a slow economic recovery.

    Stocks slipped over the past week after investors learned from government reports that jobs are getting scarcer than straw hats in a wind tunnel, and it isn't always sunny in Philadelphia.

    The big-cap indexes lost around 1%, while safe haven assets like gold and the U.S. dollar were buoyant. The best investment around for the week was the U.S. long bond, up 2%.

    To read what’s in store after last week’s gloomy data, click here.

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  • China Dumps the Dollar as Yields Sink China cut its holdings of Treasury notes and bonds by the most ever in June, instead favoring the debt of Europe, Japan and Korea. The move has fueled speculation that plummeting U.S. yields are driving away the Asian giant, which has ambitions for its currency, the yuan, to replace the dollar as the world's main reserve currency.

    China's holdings of long-term Treasuries fell by $21.2 billion in June to $839.7 billion, a U.S. government report showed recently. Total Chinese investment in U.S. debt declined 2.8% to $843.7 billion, the smallest in a year, following a 3.6% slide in May.

    The shift comes as President Barack Obama increases U.S. debt to record levels, making it harder to finance sales to sustain the U.S. economic expansion.

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  • The Fed's Treasury Purchase Plan is Just Further Proof That It's in the Denial About the Dollar This week's decision by the U.S. Federal Reserve to buy Treasuries in an effort to prop up borrowing is further proof that the economy is worse off than policymakers would have us believe. But more than that, the Fed's Treasury purchase plan is just one more reason for investors to anticipate inflation and take steps to protect their money from it.

    In case you missed the news, here's what happened...

    The Federal Reserve on Tuesday announced that instead of allowing proceeds from maturing mortgage bonds to disappear from its balance sheet, the central bank would take the "modest" step of using them to invest in new Treasuries.

    In plain English, that means that the Fed is reinvesting into U.S. Treasuries the money it would otherwise bank from maturing mortgages.

    Its goal is very simple: to keep long term interest rates from rising.

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  • Singapore's Economy Leads Asia's Rebound With Record-Breaking 2010 Growth Singapore's economy grew at a record-breaking pace in the first half of 2010, boosting Asian economic growth that is outpacing the rest of the world.

    Singapore's Ministry of Trade and Industry reported yesterday (Wednesday) that gross domestic product (GDP) grew by 18.1% in the first half of the year, expanding 26% in the second quarter from the previous three months, and 19.3% in the second quarter from the same 2009 period.

    The rise is the country's biggest since record-keeping began in 1975.

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  • With "Risk Off" Trades Waning, U.S. Stocks Could Be Ready to Reverse Course There are new signs that institutional traders are preparing for a change in direction of the U.S. dollar and European euro that may have big implications for U.S. stocks.

    For months, the winning trade was to short stocks, the euro, and commodities, while buying gold, bonds and the dollar. Commentators labeled this the "risk off" trade since gold and bonds were seen as safe-haven assets. But when crowd mentality is at work, and sentiment - not fundamentals - is driving the bids, there really isn't such a thing as a "safe" trade. It's all speculation.

    Take yesterday (Tuesday), for example: After surging 131 points, or 1.4%, out of the gate, the Dow Jones Industrial Average relinquished most of its advance to close just 16 points higher at 9,702.98. Meanwhile the Standard & Poor's 500 Index, which had climbed 1.5% to 1,038 in early trading, ended the day just 0.18% higher.

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  • Question of the Week: Readers Respond to Money Morning's Question on China's Currency After months of intense political pressure, China last week announced that it would allow its currency to gradually appreciate against the U.S. dollar. China's currency - the yuan - has been pegged to the American greenback since 2008.

    "This is going to lead to a transition from export-lead, investment-lead to more of a consumption-lead economy going forward," Jing Ulrich, chair of China equities and commodities at JPMorgan Chase & Co. (NYSE: JPM), told CNBC. "I think the ramifications are profound not just for the next few months but actually for the coming years."

    Not surprisingly, U.S. exporters embraced the news as an opportunity to compete against Chinese companies and to reduce the U.S. trade deficit. Foreign nations, including the United States, have accused China of undervaluing its currency to give its exporters an advantage in global trade.

    Chinese domestic consumption stands to benefit the most, as consumers will have more purchasing power on top of China's recent wave of multi-industry wage increases. Western companies that reach out to Mainland China can access a consumer base with more money and an increased desire to spend, which should give Western investors a chance to cash in on climbing profits.

    However, not everyone will see immediate benefits from the new currency policy. In fact, the combination of big double-digit wage increases in China and an increase in the yuan will reanimate inflation.

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  • Dollar Bulls Retreating From Bets Against Euro The biggest surge in the value of the U.S. dollar since 2005 appears to be waning, as traders retreat from bets against the euro and other currencies.

    Futures traders at the Chicago Mercantile Exchange are in the process of unwinding record bets that the dollar will rally against other currencies.

    The number of contracts hedge funds and other large speculators hold betting on a rise in the dollar versus other currencies declined by 70% to 49,335 in the week ended June 22 from a June 8 peak of 163,085, according to an analysis of Commodity Futures Trading Commission data conducted by Bloomberg News.

    With concern that Europe's fiscal crisis will cause a nation to default easing, the Dollar Index - which measures the currency against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona - is down 3.5% since June 7.

    Money Morning Chief Financial Strategist Keith Fitz-Gerald thinks there may be an opportunity to cash in on the dollar's recent weakness in view of the increasing flows of capital into Asian markets.

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  • Is it Time to Bet Against the U.S. Dollar? The U.S. dollar has been one of the world's strongest currencies in the first part of 2010. But, is the greenback really the bet choice for safety, quality and security? Read this report to find out why it's time to bet against the dollar... Read More...
  • We Want to Hear From You: Are You Worried About China's Currency Rise Sparking Inflation? After months of intense political pressure, China announced Saturday that it would allow its currency to gradually appreciate against the U.S. dollar. China's currency - the yuan - has been pegged to the American greenback since 2008.

    "This is going to lead to a transition from export-lead, investment-lead to more of a consumption-lead economy going forward," Jing Ulrich, chair of China equities and commodities at JPMorgan Chase & Co. (NYSE: JPM), told CNBC. "I think the ramifications are profound not just for the next few months but actually for the coming years."

    Not surprisingly, U.S. exporters embraced the news as an opportunity to compete against Chinese companies and to reduce the U.S. trade deficit. Foreign nations, including the Untied States, have accused China of undervaluing its currency to give its exporters an advantage in global trade.

    Read More...
  • China's Plan For Yuan Appreciation Likely to Boost Inflation in U.S. & Lift Chinese Consumer Stocks China's plan to let the yuan appreciate against the U.S. dollar is likely to hit U.S. shoppers in the pocketbook, while also making the stocks of companies with goods aimed at Chinese consumers more attractive.
    But because of wage pressures, the effects of China's move to introduce more flexibility to its currency policy won't fundamentally change its inflation problems, according to Money Morning Contributing Editor Martin Hutchinson.

    "With workers in China demanding huge wage increases to keep up with prices, there's really no economic case for letting the yuan appreciate," Hutchinson said in an interview yesterday (Monday).
    But a rising yuan and wage increases in China may gradually spell bad news for U.S. consumers.

    "Eventually, the guy shopping at WalMart Stores Inc. (NYSE: WMT) won't like it when he sees prices go up 15% or more...prices of Chinese goods - everything from video games to sweatshirts - are likely to rise in dollar terms," Hutchinson said.

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  • After a Strong First Half, Is the U.S. Dollar Headed for a Reversal? In spite of an assortment of economic uncertainties at home, the U.S. dollar has been the star of the currency world for most of 2010. Spooked by persistent and seemingly insurmountable debt problems in the European Union - and the specter of unsustainable growth and potential inflation in China - investors fled European and Asian currencies for the perceived relative safe haven of the dollar.

    But the U.S. dollar may have topped out.

    Let me explain ...

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