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I’m often hearing how much everyone seems to be anxious to put a lid on 2008 and get started over — refreshed. I can understand that. This has been a very challenging year for many investors.
But, some hidden treasures have also appeared in the markets amongst the mess we’ve become accustomed to …
Hidden Treasure #1—
A Victory for the Market Process …
Attributed to how I grew up, I’m a firm believer in the “No pain, no gain!” mentality. On the other hand, the Federal Reserve, the Treasury, and our politicians don’t seem to share those feelings. (I wrote about this in my September 6, 2008, Money and Markets column.)
Rather they favor reckless bailouts, out-of-control stimulus packages, and unabated aid.
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| Government officials continue to enable bad business with easy money. |
Nevertheless, the U.S. economy and financial system has begun a noticeable period of cleansing: Stocks, real estate, and many commodities are getting pounded into the ground.
Therefore, you can chock up at least a small victory to the market process.
Hidden Treasure #2—
The Dollar’s Bull Market …
The monetary powers-that-be may just find a way to temporarily overcome the natural healing process and instead artificially provoke a recovery. Yet despite the money being thrown at the world’s financial problems, a recovery is still not in sight.
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All HELL Is About to Break Loose Massive profit opportunities will abound as the euro craters and the dollar soars! Moscow is in emergency mode — throwing huge amounts of rubles at Russian companies to keep them from failing … The dominoes are beginning to fall throughout Eastern Europe with both companies and consumers hamstrung for cash … This is the signal we’ve been waiting for — a sure sign that the euro is only days away from self-destructing … and that the next, massive surge in the U.S. dollar could begin with the New Year … We can’t wait much longer — We MUST issue my next recos soon after the New Year. Profits of up to $1,818 per hour possible! |
However, there’s a tight correlation between currencies and stocks: As risk ebbs and flows, the buying of U.S. dollars ebbs and flows … in an opposite direction. I explained this in detail in my November 22, 2008 Money and Markets column.
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| A flight to safety combined with deflation, should lead to a long-term bull market for the dollar. |
Of course, facing several financial bailouts plus the potential for more, many analysts are adamant we’re destined for a renewed nasty era of inflation. I don’t see this happening very soon.
Instead, I expect a longer-lasting period of falling demand and falling prices.
And the flight to safety combined with a deflationary environment should lead to a long-term bull market for the U.S. dollar.
Hidden Treasure #3—
A Lower Euro …
The damage to the U.S. consumer is the biggest factor that’s going to spread economic pain across the globe. Export-centric markets, and large trade surplus nations, will undergo sharp growth adjustments over the coming quarters (See my November 29, 2008, Money and Markets column for a full explanation of Europe’s problems).
As a result, here’s what we can expect for the majority of 2009:
- Stocks will hit lower lows …
- Emerging nations will weaken dramatically, and …
- Risk-aversion will win the battle over risk-taking.
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| Investors stand to make a killing off the rising dollar and the falling euro in 2009. |
Beyond that, the U.S. economy may show signs of a recovery. Whereas competing, developed nations will continue to wallow after longer monetary and fiscal response time.
This growth differential could very easily shift in favor of the U.S. dollar and spell bad news for the euro. Both should present tremendous opportunities for investors in 2009 and beyond.
I hope you had a merry Christmas. And I hope you have a wonderful New Year’s celebration. Thanks for reading Money and Markets.
Best wishes,
Jack
About Money and Markets
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Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Michelle Johncke, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.
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