The Rise in the Dollar Doesn’t Have Everyone Convinced

As Chuck illustrated, the rise in the dollar doesn’t have everyone convinced – and Outstanding Investment ‘s Byron King is no exception. He recently appeared on the FOX Business Network to discuss the latest developments surrounding the energy markets. Byron steered the conversation to what he believed is the REAL story: the dollar strengthening for 8 weeks.

We all know the story: For most of the summer, oil was on an epic rise, as were most other commodities. The dollar was tumbling…

“Then in mid-July, it all changed. Overnight,” says Byron, echoing Chuck’s thoughts, above. “There was no big announcement from the Federal Reserve or the European central bank. Nobody said ‘We’re tanking the Euro.’ But it’s pretty clear that they decided that enough was enough. The falling dollar and rising Euro was killing exports from European countries. It was putting Germany and France into recession.

“So the central banks of the world started buying dollars. The U.S. buck strengthened. Oil fell from $145 into the $115 range. And even the Russian invasion of Georgia, or Hurricane Gustav, could not cause oil to rise. Stay tuned as this drama unfolds.

“And while you are tuned-in, don’t give up on the long-term prospects for energy, precious metals and resources. The dollar is rising? This too shall pass.

“Really, is the U.S. economy strong and getting stronger? No. Is the U.S. tax code becoming friendlier to investment and long term capital creation? No, again. Are the demographics of the U.S. labor force changing towards a long period of increasing productivity? Nope. Has the U.S. solved its problems in banking, finance, housing, energy, trade deficit, government spending? No, no, a thousand times no.

“So it’s frustrating to watch as falling oil prices, falling gold prices…but have faith over the long haul.

“Over the long haul, go with companies that own real stuff. Like oil reserves, or mine reserves, or critical technology in advanced resource industries. Go with the hard-stuff. Avoid the fluff. Or come the next financial hurricane, you might get blown away.”

Byron excels in sniffing out the ‘real stuff’.

*** Still not convinced that the strong second quarter growth was nothing more than a mirage? Here’s something that may change your mind: A report released by the Mortgage Bankers Association today shows that a record 1.249 million homes were in foreclosure during the second quarter.

In addition, from the end of March to June 30, 2.9 million homeowners were delinquent on their mortgage payments – up 25% from the same time period last year.

Our friends at Strategic Investment warn that there is an even bigger property bust on the horizon – in commercial property.

The bust could be worse for banks, stocks and the U.S. economy as a whole than the current residential debacle…an almost unbelievable notion. Bloomberg says that the United States could see the worst drop in commercial property since the 2001 recession and Morgan Stanley is calling for a 15% drop over the next 2 years.

And on that happy note, we’re signing off. Enjoy your weekend,

Short Fuse
Markets and Money

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors. Founded in 1999, Markets and Money is published in 7 countries with a worldwide readership of almost 1 million people.

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