Monday, 20 Sep 2010 09:10 AM
By: Sean Hyman
During the past couple of months, there have been some new
shifts in the markets that I’m not sure the masses are aware of
just yet.
For instance, the dollar broke its seven-month rally about two
months ago. Last week, the Bank of Japan started intervening in
the Japanese yen to change its direction. (Their interventions
will work in the near-term but not in the long-term.)
Commodities have also been surging lately. Agricultural
commodities have been increasing as “food inflation” starts to
rise. But that commodity group isn’t alone. Gold, silver and
other commodities are also hitting new highs. In fact, gold is
hitting a new all-time-high.
Stocks have even begun to put in a “higher low” recently. That
shows that stocks are likely to bounce at least through the
elections. (Isn’t that coincidental?)
I make note of these changes that are taking place because the
tendency is for investors to stick to “old trends” and not
recognize new ones when they start to appear.
However, the trend of the dollar heading lower and commodities
heading higher are here to stay for a good while (months to
years minimally).
U.S. Treasuries have also taken some serious jolts lately. It
won’t be long before that parabolic trend is over too. When bond
prices and the dollar both fall at the same time, all of these
changes will become more evident. Why? More money will run out
of U.S. bonds and the U.S. dollar and into other assets.
In fact, the commodity-currencies (Australian dollar and New
Zealand dollar especially) have benefited greatly lately from
this “dollar down, commodities up” theme. I think that theme
will continue for months minimally.
The only trend that will probably remain temporary is the yen.
You see, single-bank interventions are almost never successful
in the long run. Oh sure, the Bank of Japan can really put it to
some traders in the near-term and even the medium-term. It can
be painful for traders that are fighting against the Bank of
Japan’s wishes for three to six months.
But nine months to a year or more out … you will usually find
that these interventions are ineffective.
Therefore, if these Japanese exporting companies (like Toyota,
Honda, Sony, etc.) are smart, they will readjust their hedges
while they get a lower yen in the near-term.
You see, if they catch a break now and get some new hedges on
that will account for the yen strengthening further in the
long-run, then they will be fine. (There’s never been a better
time to have a really good currency hedger on your team).
But what does all of this mean to you? It means that your dollar
is (once again) getting watered down. It means that your costs
are going up as the prices of commodities rise.
It means that you need to be aware of this … and it also means
that you don’t have to stand idly by and let this happen to you
(even though it will happen to Americans overall).
You can use this knowledge to buy up foreign currencies that
profit from the rise of commodities. You can short the dollar;
you can buy gold and silver, etc. There are many things that you
can do to make this “American problem” your new friend.
You see, if you’re on the right side of the equation, then this
isn't a problem for you or your family. It’s only a problem if
you’re on the wrong side of it, like most Americans will be.
But not my readers. You are informed. You are educated … and now
you’ve got information to arm yourself with so that you can make
any alterations in your portfolio like you need.
I’ve been preaching this to my Money Matrix Insider subscribers
for a while now … and now I’m telling you, too.
Position yourself properly and you won’t suffer like most will.
The key to success in this area is being armed with the right
information in a timely fashion to where you can make the needed
changes to avoid the dilution of your dollars and the vicious
“gobbling effect” that the rise of inflation has on your
finances.
About the Author:
Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust.
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