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Exactly - For those of us playing in Sir Al's sandbox, it is important to
hedge the USD value - forex, futures, or options on futures.
IMHO it is vital at this juncture to not hold un-hedged USD denominated
assets (including our real estate).
The issue isn't whether or not the dow is going up or down, that's a
speculative play; but how we protect against the almost certain errosion in
dollar value, which is a structural correction play.
The Dow and our recovering economy are now where they are because of $ 1 T
in 'stimulus' - read more dollars as reflected in the declining dollar
index. Of course that was the game plan and most folks are happy the economy
is bouyant (- the operative word is 'most'!). Thus whether the Dow goes to
10,500 11,500 or 12,500 may have little impact on our real worth because, if
those moves continue to be the result of 'stimulation' vs real economic
improvement. If so, Dow gains will be accompanied by errosions of the
dollar's value (certainly not in direct proportion - but that is is trend).
Only if we see the Dow go up because of real economic improvements: new
factories, new company investments in expansion (not buy backs), and real
improvement in jobs AND wages; should we expect to realize real gains.
Outside the US - investors deal with this all the time. Their investment
accounts can be denominated in various currencies and they make careful
decisions how to protect the real value. As an example, up until last month
European investors have been dumping $ 28b /mo into USD investments. Last
month they took out $ 400m. I guess that 'careful decision' making process
didn't include holding USD assets.
In the USA we have been spoiled since WWII with the supremacy of the
dollar - first when it was gold backed, and later (after 1971) when it was
backed by our worldwide econmic stature. IMHO 90% of the American public is
oblivious to the impact of a falling dollar on their fortunes. Test: At
the upcoming XMAS parties - ask folks you consider to be knowledgeable
investors over a cocktail what, if any thing, they are doing in 2004 to
counter the impact of the falling dollar - bet the response is 'huh?'.
====
The dollar/EUD reversed yesterday, and today we are seeing a vigorous dollar
rally. Probably have a week of rally, leaving a good time to hedge.
And just a thought - if you have some dollar denominated money market funds
languising - Everbank foreign denominated 3 mo CDs have been yielding about
20% - not bad for an insured* bank deposit! Give the dollar a week of rally
and these will look even better.
Regards, daver.
* only the principal and 4% or CD interest - all the rest Gain/loss is due
to exchange rates and of course un-insured.
-----Original Message-----
From: Wyatt [mailto:wparkinson@xxxxxxxxxx]
Sent: Tuesday, December 09, 2003 7:56 PM
To: daver; omega-list@xxxxxxxxxx
Subject: RE: Wall St. Week Ahead Dow to Run at 10,000
By what you're saying, maybe I should open a FOREX account and go long for
anything xxx/USD and short for anything USD/xxx.
As for my prediction on the DOW, I think it will hover just above 10,000
come June; probably 10,500. Dow will have to test 10,000 several times
before closing above it. Usually happens when indexes get close to a
psychological level like that. Today, the Dow touched 10,000 and promptly
plummeted. Same thing happened to NASDAQ Composite a week or two ago when
it hit 2000. NASDAQ hasn't been anywhere near 2000 since.
-----Original Message-----
From: daver [mailto:daver@xxxxxxxxxxxx]
Sent: Monday, December 08, 2003 11:25 PM
To: Omega-List; Gerald Marisch
Subject: RE: Wall St. Week Ahead Dow to Run at 10,000
So what - Foreign investors are figuring that putting USD into the Dow even
if it goes from 9965 to 11350 is an opportunity lost trade.
Unfortunately the 'Dow' is a US dollar denominated asset. The Fed and
Treasury can make the Dow by worth just about any number of USD they want to
get Bush re-elected (and they have). However, the real issue is whether
your investments are ahead in June 2004 against any real measure (what does
medical insurance cost, what does a trip to Paris cost in USD, what does
underwear made in China at WallMart cost, what does it cost to fill up your
car, how many Euros can you buy, how many ounces of Gold, etc, etc). Forget
Govt CPI number - that's pure baloney designed to get CPI indexed government
payments low (IE Social Security).
Beef, Copper, Gold, Silver etc etc are going through the roof. It is quite
likely that June 2004 will see a further 20% decline in the dollar (read
commodities up approx 20% - as in oil at $ 36/barrel). 'IF' you have $USD
100,000 invested in the DOW now at 9965; and 'IF' it hits it hits 11,350 by
June 2004, relative to say, a European or Japanese Investor in their
currencies you will have lost. An investment in
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