MARKET COMMENT
April 10, 2007
Among the handful of markets we’ve been posting as “important
to watch”, the fate of the dollar has been consistently one.
We’ve noted it being on a cliff for many
months and perhaps today the fall begins.
I hope Bucky has a chute.
A falling dollar is inflationary generally.
Given the trade deficit with China that
reportedly doubled today trade tensions have mounted.
The US
has filed a complaint with the WTO and China doesn’t like it.
A falling dollar doesn’t ease the trade
deficit “much” with China
since their currency is managed.
Plus a falling dollar will cause gold to rise as investors
understand the dollar/inflation relationship.
Further gold price increases are also, beyond global geopolitical tensions,
a vote of no confidence in monetary policy within the US.
As we just mentioned yesterday overseas markets have
produced the best returns over the past four years.
One aspect of this is currency.
US Dollar based investors profit more in
overseas funds when the overseas index and currency are strong.
But,
be warned, if trade disputes erupt everything can change.
I was going to outline some US markets but then that’s not the
main theme today is it?
It may be
tomorrow.
The week is still young and you can bet officialdom is
keeping close tabs on both currency and gold markets.
A smackdown could
occur at any moment.
A further warning is that trade wars and tariffs are market
negative eventually but only temporarily politically satisfying to some.
The Chinese are playing from a rigged deck
while the US
sometimes appears to be just gluttonous consumers and naïve politically.
One day we’ll wake up and the Chinese will
present us the bill.
Have a pleasant evening.
Disclaimer:
Among
other issues, the ETF Digest maintains long or short positions in:
UDN, FXE, FXA, FXC, DBV, GLD, DBP, DBB, GDX,
DBE, DBC, EFA, IEV, ILF, EWA, FXI, EWY and EWO.