Archives for October 2010

October 2010 - Page 7 of 9 - Money Morning - Only the News You Can Profit From

Money Morning Mailbag: Japan's Rising Yen Struggle Signals Need for Industrial Shift

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The yen strengthened as much as 82.75 per dollar Wednesday, fueled by speculation that the U.S. Federal Reserve would buy more government bonds after a drop in U.S. payrolls.

The yen's rise came after the Bank of Japan tried yet again this week to devalue its currency. On Tuesday the Bank of Japan lowered the benchmark interest rate to "virtually zero," and announced a $60 billion (5 trillion yen) plan to buy government bonds – similar to the 'quantitative easing' policy employed by the U.S. Federal Reserve.

"With today's decision, the Bank of Japan paved the path for the next step," Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo told Bloomberg News on Tuesday. "What will be critical will be how foreign-exchange rates move as a result," along with the impact of any additional easing by the Federal Reserve, she said.

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As QE2 Looms, Is the Fed Focusing on the Wrong Things?

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U.S. Federal Reserve Chairman Ben S. Bernanke is looking forward to 1932.

That's not a misprint. Actually, Bernanke is looking forward to a point when the challenges facing today's U.S. economy mirror the problems of that particular Great Depression-era year. And he wants that to happen for a very simple reason.

He knows how to solve those problems.

Unfortunately, "1932" isn't likely to arrive. And the preparations the Fed is making in the meantime are likely to deepen the United States' economic woes.

Let me show you what I mean…

To see where the central bank has gone wrong, please read on...

Iraq's Energy Sector Is Moving Forward - With or Without the U.S.

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Iraq on Wednesday broke the record – 207 days – for the time between a parliamentary election and the formation of a government. But while Iraq's government is at a standstill, the country's energy sector remains dynamic and U.S. companies can't afford to wait for the political climate to thaw before diving in.

Iraq is slowly retaking the shape of one of the world's most prolific oil producers. Its reserves are actually 25% larger than previously thought.

"Iraq's oil reserves which are extractable are 143.1 billion barrels," Hussein al-Shahristani, Iraq's oil minister, said earlier this week, basing his comments on data provided by Organization of Petroleum Exporting Countries (OPEC).

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QE2: How New Quantitative Easing Will Launch Emerging-Market Stocks

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 In Wall Street circles, it's known as "QE2" – for "Quantitative Easing – Round 2."

The U.S. Federal Reserve and the Bank of England (BOE) are moving rapidly towards it, and the Bank of Japan (BOJ) has pledged to enact it.

That Bank of Japan pledge ignited a $23.50 spike in the price of gold on Tuesday. But that's nothing compared to what would happen after a Fed move. An additional easing by the U.S. central bank would cause gold and commodity prices to spike – and emerging-market stock markets to soar.

We should be prepared for this eventuality.

To see how you can profit from "QE2," please read on...

IMF Warns of Slower Growth As Currency War Rages On

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Meetings of the Group of Seven (G-7) countries in Washington this week could feature a clash of views that have sparked an international currency war even as the International Monetary Fund (IMF) warned that growth in developed economies is slowing.

The conflict represents a fundamental disagreement about how to sustain the global economic recovery among countries that prefer flexible exchange rates like the United States, and others that are resisting calls to allow its currency to appreciate, like China.

A renewed push for easier monetary policy came as the IMF warned growth in advanced economies is falling short of its forecasts.

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With Prices Soaring Gold Bullion is Suddenly in High Demand

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The world's wealthiest people are moving their money out of stocks and into gold bullion, sucking the yellow metal up by the ton in some instances.

Fears that the dollar will continue to lose value in the wake of the U.S. Federal Reserve's quantitative easing have boosted the appetite for physical bullion as well as for mining company shares and exchange-traded funds (ETFs), UBS AG (NYSE: UBS) executive Josef Stadler told the Reuters Global Private Banking Summit.

"They don't only buy ETFs or futures; they buy physical gold," said Stadler, who runs the Swiss bank's services for clients with assets of at least $50 million to invest. "We had a clear example of a couple buying over a ton of gold … and carrying it to another place," Stadler said.

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Question of the Week: With Gold Prices Soaring Investors Are Cashing In

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Gold prices have continued their record-breaking climb, and are showing no signs of stopping.

Industry analysts and bankers met at the London Bullion Market Association conference in Berlin last week – the biggest gold industry gathering – and predicted gold would hit $1,450 an ounce next year, a 12.5% climb from its current price of around $1,300. The LBMA's predictions have a strong track record, and in recent years often fall just shy of actual prices.

Gold is up almost 20% this year, and having this week topped $1,340 an ounce.

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The Secret Indicator That Points to Much Higher Oil Prices

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Crude oil has taken on a life of its own. As I have noted on several occasions, oil is both a commodity in wide demand and a financial asset in its own right.

In the former case, as a commodity, the so-called "wet" barrels (the actual oil) will respond to traditional marketplace pressures – particularly supply and demand.

In the asset role, which involves futures contracts (the "paper" barrels), oil becomes something that can be used as a store of value. As we'll see momentarily, oil's role as a financial asset underpins a crucial new development.

Six catalysts are behind the recent increase in oil prices. Five are well known in the marketplace. But it's the sixth catalyst – not as widely known or understood – that is central to our forecast that oil prices will continue their march.

This sixth catalyst also enabled us to uncover a significant opportunity for you to make a great deal of money.

To find out about those profit plays, please read on...

Will the Fed's Spending Drive Stocks Back Up to Their Pre-Lehman Levels?

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The Standard & Poor's 500 Index is up more than 10% in the past month, and it finally looks like all of the thin threads of strength we've seen over the past few months are starting to twine together into a single rope that may be strong enough to pull stocks back up to pre-crisis levels.

The key threads are:

Even if you are skeptical of these developments, remember one thing: The Fed has absolutely flooded the financial system with money.

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We Want to Hear From You: Are You Prepared for the Global Currency War?

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The housing market remains in the dumper. U.S. stocks – despite a rally – are still 22% below their record highs of two years ago. And the "official" unemployment rate remains at a heart-stopping 9.6%.

With their knees almost ready to buckle under such burdens already, how will American consumers respond when clothes, computer accessories or other key consumer staples at their neighborhood Wal-Mart Stores Inc. (NYSE: WMT) undergoes an overnight price hike of 30% to 60%?

As the United States aims to increase exports by debasing the dollar, a global currency war is underway that could swallow consumers and investors if they don't prepare for the likelihood of a weaker dollar.

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