Continue reading Serious Money: Is gold an investment?

Serious Money: Is gold an investment? originally appeared on BloggingStocks on Fri, 11 Dec 2009 18:00:00 EST. Please see our terms for use of feeds.

The gold bugs are on the loose. Today gold shot up to another new high of $1,212 per ounce. So far this year gold has risen 34%.

Investors are looking for a safe haven and are running headlong into gold. Governments around the world are buying more gold, with India buying 200 metric tons from the International Monetary Fund. The US Mint has run out of gold coins. The situation in Dubai is up in the air.

Continue reading Gold closes at a record high of $1,212 per ounce

Gold closes at a record high of $1,212 per ounce originally appeared on BloggingStocks on Wed, 02 Dec 2009 17:00:00 EST. Please see our terms for use of feeds.

Continue reading Closing Bell: Stock bulls and dollar death (DDRX,GMCR, PEET, SBUX, EBAY, CI, TECD)

Closing Bell: Stock bulls and dollar death (DDRX,GMCR, PEET, SBUX, EBAY, CI, TECD) originally appeared on BloggingStocks on Mon, 23 Nov 2009 16:00:00 EST. Please see our terms for use of feeds.

A Bloomberg survey reports that policy makers boosted currency holdings by $41.3 billion dollars in the last quarter. Nations reporting currency breakdowns put 63% of this new cash into euros, and yen. The dollar's share fell to 37% from 63% in 1998.

How is this affecting the dollar on the commodity futures markets? The dollar fell to 75.77 last week on the Intercontinental Exchange Inc. (ICE). This is the lowest level since March 4th, when it was at 89.62 (The dollar is traded against a basket of currencies.)

Continue reading Dollar is at a critical stage as banks shift reserves

Dollar is at a critical stage as banks shift reserves originally appeared on BloggingStocks on Mon, 12 Oct 2009 14:30:00 EST. Please see our terms for use of feeds.

Don't be deceived by the short-term performance of United Technologies (NYSE: UTX). The weakness of the dollar in the second quarter helped push shares of this multinational manufacturer higher. But these gains merely allowed the company to recover big losses sustained during the first quarter of the year.

The double whammy here for investors is exposure to the aerospace industry. As described previously, the weakness in the airline industry will negatively impact revenue for those companies providing equipment to the space. In addition, reductions in defense spending will also negatively impact UTX.

We are in the early stages of seeing change in how this company operates in the current environment. There is no catalyst for this stock to go higher, and shares are vulnerable to the extent the dollar strengthens. I would sell UTX.

Next: Stock to Avoid #9

Stock to avoid #8 -- United Technologies (UTX) originally appeared on BloggingStocks on Sun, 19 Jul 2009 11:00:00 EST. Please see our terms for use of feeds.

Reuters reports that Treasury Secretary Hank Paulson is in the middle of oil country -- Qatar -- talking about how a strong dollar is in the U.S. interest. With the dollar down 72% since January 2001, it would be nice if Paulson would use his power to strengthen the dollar.

Unfortunately, he doesn't have enough power or chooses not to use it. The power to influence the strength of the dollar resides in the Oval Office. With a $410 billion budget deficit, $9.4 trillion in government borrowing, and interest rates that have dropped from 5.25% to 2% since August, it's not a big surprise that the dollar is so weak.

And since oil is denominated in those ever-weaker dollars, the price of gasoline tops $4 a gallon -- a big "surprise" to the Oval Office occupant. Nevertheless, this is great news for Qatar and its neighboring countries. Our leaders are protecting the interests of those Middle Eastern countries -- both through military policies and economic ones -- while talking about a strong dollar.

Those countries have outsourced their military defense to the U.S. And the rest of us are paying the price.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Paulson talks strong dollar, acts weak originally appeared on BloggingStocks on Sun, 01 Jun 2008 09:32:00 EST. Please see our terms for use of feeds.

Continue reading Oil climbs to new highs

Oil climbs to new highs originally appeared on BloggingStocks on Mon, 03 Mar 2008 12:02:00 EST. Please see our terms for use of feeds.

Is the declining dollar just a longer cycle than we have seen before or are there fundamental global economic forces at play, and why? How did we get to where we are now? What does the future hold? How are emerging markets like Brazil, China and India affecting the current situation?

It's not just a longer cycle. Since January 2001, the dollar has lost 64% of its value relative to the euro. There is a conscious U.S. policy to aid companies that export and to help the oil industry - since a weaker dollar causes oil prices to rise.

How did we get to where we are now?

The mechanisms for weakening the dollar are the opposite of the ones strengthening it. U.S. policy was to increase debt -- it sits at $9.4 trillion -- to cut taxes by $1.3 trillion, thus boosting the Federal Budget deficit, and to spend a huge proportion of the Federal budget on wars -- $2.4 trillion worth. If an objective credit analyst were to scrutinize the U.S. balance sheet, it would conclude that it was in bad shape - not unlike third-world countries in the late 1970s. Thus the dollar is not seen as a good store of value and it has plummeted in value.

Continue reading What are the prospects for the U.S. dollar?

What are the prospects for the U.S. dollar? originally appeared on BloggingStocks on Thu, 28 Feb 2008 14:12:00 EST. Please see our terms for use of feeds.

Continue reading The dollar continues its fall

The dollar continues its fall originally appeared on BloggingStocks on Fri, 23 Nov 2007 08:40:00 EST. Please see our terms for use of feeds.

Inflation is above expectations, and it raises a question of what the Fed should be doing. Bloomberg News reports that the Consumer Price Index (CPI) rose 0.3% in September, compared to the 0.2% rise economists expected. And according to Reuters, the Producer Price Index (PPI) was up 1.1% -- way ahead of economists' projections of a 0.4% rise -- creating a tough problem for the Fed.

Will the Fed derive comfort from the core PPI figure, which was up 0.1%? It seems to pick numbers conveniently -- such as the 1.8% August rise in consumer inflation net of food and energy prices -- that give it comfort. Or will it view the 1.1% rise as another indicator -- along with the 4.1% rise in labor costs -- that inflation is out of control.

Why do we have a Fed anyway? Is it to bail out Wall Street through an unexpected 50 basis point rate cut? Or is it to keep inflation within a 1% to 2% range? I think the Fed is leaning towards bailing out financial markets rather than controlling inflation.

Continue reading Protection from inflation, weak dollar: Posco (PKX)

Protection from inflation, weak dollar: Posco (PKX) originally appeared on BloggingStocks on Wed, 17 Oct 2007 10:24:00 EST. Please see our terms for use of feeds.

Oil prices have continued to climb today, and are currently (10:30 a.m.) trading up $0.83 to $83.71. Earlier in the session, it had looked as though profit taking would drive prices lower, but that sell off was only momentary and supply concerns along with weakness in the U.S. dollar have once again led to price gains. Update: by the end of the day, oil had reversed again to close at $81.66.

There are several factors that are leading to the recent run up in oil prices. I have looked at these a few times over the past few days, and they remain the same; upcoming winter heating months, geo-politcal unrest in the Middle East, and the looming threat of disruptions related to the hurricane season. All of these have one thing in common -- supply / demand concerns. The market will react quickly and emotionally to any one of these factors, and even more strongly should more than one start to play out at the same time.

Yesterday, I mentioned the increasing tension between Iran and the West, with Iran now claiming the nuclear issue to be a "closed case" and that it will defy any UN sanctions imposed on it. This is happening at the same time that the United States is toughening its stance against the Middle Eastern country and calling for other nations around the world to do the same in its attempt to put an end to the ruling party's "reign of terror."

Continue reading Oil prices resume their record climb -- and then back down

Oil prices resume their record climb -- and then back down originally appeared on BloggingStocks on Fri, 28 Sep 2007 12:40:00 EST. Please see our terms for use of feeds.