Global Stock Markets Weaken

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

Our Video Related to this Blog:

Both the Nasdaq and Dow were down 2% yesterday. The S&P 500 and Russell 2000 were down 2.3% and 2.5% respectively. Euro markets were also down yesterday after the route in the Chinese market Sunday night. While the Nikkei held up on election news, it was down 2.4% last night. Global markets have been rising together for the last 6 months and now seem to be selling off in tandem as well. China led the world's stock markets up and seems to be leading them down.

As expected, the ISM Manufacturing report yesterday came in above 50, which indicates expansion. It was the first time in 19 months above this level. The 52.9 reading was up from 48.9 in July. The new orders component was up 10% and was responsible for much of the rise. As has been pointed out in this blog, the Cash for Clunkers program is behind much of the recent burst in U.S. manufacturing activity. Recovery is only meaningful if it takes place without government stimulus however. Otherwise the economy falls right back down as happened in Japan repeatedly in the 1990s and 2000s and seems to be happening in the UK right now. The glowing bullish AP coverage of this report at least also stated "as long as consumers remain hamstrung by weak pay and job losses and wary of ramping up spending, the economy might not be able to sustain a recovery". Oh really?

Weak pay is the operative word. The Productivity Report today had productivity up 6.6% last quarter, the most in several years. While the rah-rah-rah media gave the usual bullish spin to the news, it is actually quite bleak. The big rise took place because labor costs fell so much. They were down 5.9% in Q2 after being down 5.0% in Q1. This means a lot less money is going into the average consumer's pocket. At the same time credit availability is also being cut. So how are consumers going to increase spending? Retailers are currently reporting that back to school sales are weak as should be expected. So much for 72% of the American economy doing well.

The dollar was up yesterday as has been the case since March when stocks sold off. It closed at 78.76, above its 78.33 breakdown level. It was below that key point part of the day. Gold was mostly flat yesterday, but was trading at $965 this morning. Silver is above $15. Gold is trying to get back to its $1000 breakout level and may do so soon.

NEXT: Inflation News Sends Gold Soaring

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

Australian and Canadian - the Only Dollars Worth Holding

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

By the November 14, 2007 meeting of the New York Investing meetup, deterioration of the U.S. dollar had become pronounced. The trade-weighted dollar had fallen further through its long-term support level and hit a series of new all time lows. Not surprisingly, the euro hit a series of new highs reaching an exchange rate of 1.47 to the dollar. The rallies in the Australian and Canadian dollars (both economies are based on food and commodity production) were even stronger however. At one point, it had taken approximately two Australian dollars to get one U.S. dollar, by November of 2007 only around 1.1 Australian dollars were necessary to get an American dollar. In the early 2000s, one U.S. dollar got you 1.61 Canadian dollars, but by November you would only get 91 Canadian cents.

There were two talks that month at New York Investing that dealt with what was going on in the currency market and the implications for investing, "Investing Like It's 1979" and "How to Profit from the Falling Dollar" (see http://investing.meetup.com/21/files). Currency movement don't exist in a vacuum of course, but affects the price of commodities because they are priced in U.S. dollars. By November 2007, Oil had gotten to $97 a barrel making a series of all time highs, although it first broke its nominal 1980 high of $39.50 a barrel in 2004. While oil was a leader in reacting to the value of a declining U.S. dollar (the dollar had been falling since 2002), gold's reactions were more coincident to changes in the American currency. Gold had reached $848 an ounce getting close to its nominal intraday high of $875 in 1980, but not enough to establish a new record. Of the three inflation-related commodities, silver was by far the laggard, reaching only $16 plus and ounce, not even near its $50 an ounce high from 27 years earlier.

The specifics of how to invest in currencies and commodities, such as ETFs (exchange traded funds) and foreign currency denominated CDs and accounts were not only handled in the talk, "How to Profit from the Falling Dollar", but in three videos produced by the New York Investing meetup. These videos represented an investing blueprint for the average investor on how to handle the new inflationary environment the Federal Reserve had created. Please see these video for more on this topic:

Currencies I – How to Profit From the Falling Dollar
http://www.youtube.com/watch?v=dTImG1dWT4k

Currencies II – How to Profit From the Falling Dollar
http://www.youtube.com/watch?v=XhfwatOCx_k

Commodity Investing – How to Profit From the Falling Dollar
http://www.youtube.com/watch?v=IG5zApWcOk0

Next: Sub-prime Housing Leads to Sub-prime Financial Institutions

Daryl Montgomery
Organizer, New York Investing meetup

For more about us, please go to: http://investing.meetup.com/21