Worldwide government leaders hoped their recent summit would calm investors even though they didn't really come up with anything specific. But it looks like a non starter. Asian markets opened down on Monday morning, showing disappointment that more didn't come out of the summit, European markets followed suit and U.S. stock futures are indicating a lower open as well. Also, news broke that Japan and Hong Kong slid into recession.
The value of both the Yen and the U.S dollar rose as investors looked for safety. Their actions show they were disappointed with the summit and with the fact that world leaders didn't take more concrete steps to avert a global recession.
What did the Group of 20 agree to do? They all agreed to act independently to be sure financial markets, products and participants are subject to supervision, but no coordinated plans were developed. The fact that the leadership of the U.S. is in flux for the next couple of months until President-elect Barack Obama is inaugurated in late January didn't help matters. While he sent Representatives to the meeting only President George Bush attended.
What international transaction perhaps best symbolizes the U.S. dollar's rough year of 2007?
Giddy British tourists with more money to spend in New York than, seemingly, Donald Trump?
How about an international attraction that won't take dollars? In November 2007, India's Taj Mahal, one of the seven wonders of the ancient world and India's most popular shrine, announced it would no longer accept the dollar, citing the greenback's weak currency status, and accept only rupees, Bloomberg News reported Thursday.
Since January 2001 or during the past six years the dollar has fallen about 55% against the euro, 35% against the British pound, and about 10% against the Japan's yen. On Thursday the dollar was mixed against the world's major currencies. The dollar gained 0.62 cents to $1.4320 against the euro and 1.50 cents to $1.9831 against the British pound, but fell 0.25 yen against Japan's yen.
When a currency, such as the dollar, declines versus another currency, that means the purchasing power of those holding the dollar declines - - a sort of 'non-legislative' tax increase. It goes without saying that most citizens, and institutions, don't like to hold currencies that decline in purchasing power.
Could an ongoing shift in economic fundamentals drive a dollar rally in 2008? It's possible, currency analysts say, if the U.S. economy also follows-through with modest economic growth in 2008.
"I am confident that the dollar will have a significant rally next year, especially against the euro and the pound,'' Stephen Jen, the London-based head of currency research at Morgan Stanley told Bloomberg News on Monday. Jen expects the U.S. currency to strengthen to $1.35 against the euro by December 2008. "The deficits are shrinking fast.''
The dollar traded at $1.461 against the euro, at $2.0640 against the British pound, and at 110.46 yen against the Japanese yen Monday afternoon.
This post was part of AOL Money & Finance's Best & Worst of 2007 feature. The voting has now closed and readers have chosen the weak dollar and rising oil and gold pricesas the money story of the year. Be sure to let us know in the comments if you are pleased with this result.
As we approach the end of 2007, we now have a really tough question to answer. What is the Money Story of 2007? What are the candidates?
The Boom and Bust in Private Equity Buyouts
As we entered 2007, no one could imagine the activity with private equity firms around the world. Private equity firms were supposed to be the new Masters of the Universe, ushering in a new Gilded Age not seen since 1920s. We saw this with the initial public offering of the Blackstone Group, the premiere private equity group. This was followed by a series of public and semi-public offerings by other organizations, such as Apollo Group.
However, the new Roaring '20s was relatively short-lived with the credit crunch. This caused most merger activity, including corporate buyouts, to come to grinding halt. Blackstone Group (NYSE: BX) now trades substantially below its high price. Who could guess that private equity would experience a boom and bust all in the same year? However, before you dismiss private equity as an element of the past, remember that most of these firms still have substantial cash available ready to invest when conditions are ripe.
While some OPEC oil ministers who attended this weekend's Riyadh summit continued to express support for shifting a portion of their cash reserves to the euro and away from the dollar, oil market traders and analysts focused on OPEC's failure to boost oil production. This helped move oil prices higher in mid-day trading Monday.
Oil, which traded around $94.50, is priced in dollars, hence when the dollar falls, the purchasing power of nations with petro dollars declines. Some OPEC members, including Iran and Venezuela, voiced strong support for converting cash reserves to a currency other than the dollar. Iranian President Mahmoud Ahmadinejad called the dollar a "worthless piece of paper," the Associated Press reported.
The dollar must be feeling a little like the late stand-up comedian Rodney Dangerfield, because recently, the dollar "just isn't getting any respect."
The dollar fell to a record low against the euro Tuesday morning, moving to $1.4556 before trading around $1.4545 on talk that the U.S. Federal Reserve is likely to lower interest rates further in an effort to stimulate the U.S. economy and counteract the economic drag effect of subprime mortgage losses. If the Fed cuts rates at its next meeting in December, it would be the third rate cut in four months.
Against the British pound, the dollar moved to $2.0897, a 26-year low, before retreating to trade around $2.0875 in Tuesday mid-morning trading. The dollar also fell to 92.59 cents against the Canadian dollar, but traded slightly higher against Japan's yen, rising to 114.75 yen from 114.55 yen earlier in the day.
In the coming weeks, bloggingstocks.com will review those stocks most likely to benefit under each scenario: a weak dollar or a strong dollar.
Commodities expert Jim Rogers is on-record with where he thinks the U.S. dollar is headed in 2008: down. That, in and of itself, is not news.
"It doesn't take a genius to figure out that it's a currency that's going to be going down for some time to come," Rogers said in an interview with the Financial Times. Rogers added that in his interpretation the U.S. Federal Reserve's and the U.S. Treasury's willingness to print money and drive down the greenback is clear.
Among other consequences of the dollar's continued fall, Roger sees higher commodity prices, a rise in U.S. inflation, and a rise in China's currency, the yuan (if the Chinese government lets it rise more). Rogers, chairman of Beeland Interests Inc., said he is also shorting shares of Citigroup (NYSE: C). [Citigroup's shares closed down $1.92 to $35.81Monday after the company said it will have to write-off $8 billion-$11 billion to account for the reduced value of subprime mortgage-related securities.]
All of which begs a good question by the investor / reader: How did the U.S. dollar drop so much in value?
I'm glad that I'm not the only one who is just a little miffed at the way that Fed chairman Ben Bernanke and his elite staff have chosen to handle our economy. My feelings fall pretty much in line with those of investment genius Jim Rogers. I listened to a short interview with him today on public radio. He pretty much confirmed my belief that the dollar could be going the way of the dinosaurs. For crying out loud, the Fed dumped about four tons of greenbacks on the financial system Thursday. Bank leaders such as Citigroup Inc. (NYSE: C) aren't generating enough profit to meet the demands of operation and to please the shareholders at the same time! What's the Fed going to do about the 80% profit decline at Wachovia Corp. (NYSE: WB)? A lower basis point for bank borrowing won't even scratch the surface of the cash shortfall. In fact, the lower the basis point the more it injures the bank's ability to make a profit on the loans that we need right now to salvage some home ownership scenarios from the mortgage debacle. How much more evidence do you need to realize we are living in a time of disastrous fiscal policy? We're lining up to make 1929 look like a cake walk.
Remonstrations about the weak U.S. dollar are getting to be a little bit like what Mark Twain said about the weather:
"Everyone seems to complain about the weather, but no one ever seems to be able to do anything about it," Twain said.
Similarly, everyone seems to complain about the weak U.S. dollar, but no one ever seems to be able to do anything about it.
This time it was former U.S. Treasury Secretary Robert Rubin, who Tuesday told Bloomberg News that relying on a falling currency to increase exports isn't a "sound approach" and said policies should be implemented to strengthen the dollar.
In the weeks ahead, BloggingStocks will take an in-depth look at China's economic expansion, its impact on the global and U.S. economies, and also review a few stocks likely to benefit from China's development.
China's announcement that its economy grew at annualized rate of 11.5% in Q3 has done nothing to quell economists' concerns that its economy is growing too fast for both the betterment of its mainland citizens and international markets/commerce.
China's government points to a "successful" slowing of the economy in Q3 to 11.5% from 11.9%. But the minor GDP drop was not what economists were looking for. Economists would have rather seen a Q3 GDP growth rate of 8% or 9% -- i.e., a 15%-25% drop in the rate of growth as evidence of a slower economy. Further, little in China's Q3 report indicated that the country is correcting macroflaws in the economy -- namely, too much heavy industry, high energy use, and a dependence on export sales, to go along with another serious flaw: domestic underconsumption.
Regarding the latter, China has taken some measures to help its middle class expand, and domestic consumption is rising. But domestic consumption still is not large enough: China said domestic consumption has accounted for about 37% of economic gains so far in 2007, down from 39% in 2006. In other words, China is still not at a point where consumer spending can support its economy, and also stimulate growth in other countries through the purchase of foreign goods and services.
Oil Update: Oil is now above $90 per barrel. This latest push higher by oil was blamed, for the most part, on tensions between Turkey and Kurdish Workers Party (PKK) rebels seeking Kurdish independence, which threatens to disrupt oil transport in northern Iraq. Crude oil reached new nominal high Friday of $92.22, although in real terms the price is still below oil's inflation-adjusted high of $101.70 set in April 1980 during the Iran hostage crisis.
Here's a snapshot of crude oil market conditions using three analytical frameworks, or measuring sticks, if you will, with a note on several intangibles:
Geopolitical: Add the Turkey/Kurd dispute to Iran (nuclear technology/weapons) and the Iraq War ,to confrontations and military actions that are adding a "war premium" to the price of oil. Depending on the analyst, that war premium has inflated crude oil's price by $10-$25 per barrel. Political unrest in Nigeria and a hawkish stance in Venezuela also items on analysts' radar screens.
Its abundance of resources and location on the Great Lakes have made Ontario an economic powerhouse. Canada's capital, Ottawa can be found there, as well as its largest city, Toronto, which is also Canada's financial hub. Seven of Ontario's eight largest companies are financial institutions, and Toronto is also the home of one of the largest stock exchanges in the world. When the Motley Fool took a look at stock investment opportunities in Ontario this past June, three of the companies they focused on were financial institutions: Royal Bank of Canada (NYSE: RY), Manulife Financial Corp. (NYSE: MFC) and Toronto-Dominion Bank (NYSE: TD). Considering the credit crunch and the weakness of the U.S. dollar, I thought it might be interesting to see how those companies are faring now.
The Royal Bank of Canada, also known as RBC Financial Group, is Canada's largest financial institution. It has 1,300 domestic locations and offices in 30 countries. In September, RBC's Gord Nixon won Canada's Outstanding CEO of the Year award for 2007. More recently, RBC announced the acquisition of a Caribbean bank, and it was one of four Canadian banks affected by restructuring at VISA. With RBC's five-year earnings per share growth rate of 26.5% (better than the S&P 500), the consensus recommendation of analysts surveyed by Thomson Financial is to buy RBC, despite missing earnings expectations for the past two quarters. RBC's share price is near an all-time high on the NYSE, closing Thursday at $57.09 on the NYSE. RBC will release its next quarterly report on November 30.
Worldwide government leaders hoped their recent summit would calm investors even though they didn't really come up with anything specific. But it looks like a non starter. Asian markets opened down on Monday morning, showing disappointment that more didn't come out of the summit, European markets followed suit and U.S. stock futures are indicating a lower open as well. Also, news broke that Japan and Hong Kong slid into recession.
What international transaction perhaps best symbolizes the U.S. dollar's rough year of 2007? 
As we approach the end of 2007, we now have a really tough question to answer. What is the Money Story of 2007? What are the candidates?
While some OPEC oil ministers who attended this weekend's Riyadh summit continued to express support for shifting a portion of their cash reserves to the euro and away from the dollar, oil market traders and analysts focused on OPEC's failure to boost oil production. This helped move oil prices higher in mid-day trading Monday.
The dollar must be feeling a little like the late stand-up comedian 
I'm glad that I'm not the only one who is just a little miffed at the way that Fed chairman Ben Bernanke and his elite staff have chosen to handle our economy. My feelings fall pretty much in line with those of 
Its abundance of resources and location on the Great Lakes have made 
Stock picks and pans for troubled times: RIMM, ED, ISRG, GLW, LEA, SLB, GOOG ...
Is Berkshire Hathaway better than S&P Index?
Closing Bell: Torch Passing on a Friday Rally
