Even as America’s dollar enjoys a respite, thanks to repatriating funds flowing back into hedge-fund coffers, the currency will drop sharply in the next three to six months.
Right now, the dollar rebound comes as risk-taking funds based in places like Connecticut and the Caymans unwind their bets on cheap securities in South Korea and other fledgling markets.
Media attention to government bailouts and Federal Reserve backing of distressed paper is helping the dollar, too.
Ahead is almost certainly an altered state for the greenback as investors around the world size up the cost of WAR, BAILOUTS, and LOWER TAX REVENUE from American businesses and individuals.
The Congressional Budget Office, which tends to be non-partisan but lowball in its calculations, figures the U.S. government’s shortfall in running the nation will reach $500 billion within the next 12 to 15 months. Other, more independent, bodies peg the deficit at approaching $850 million by fiscal year 2009.
What’s more (or less as the case might be) is the U.S. Federal Reserve’s injection of dollars into the nation’s banking system. The Federal Reserve’s balance sheet rose to $1.5 trillion in the most recent reporting period from $918 billion at the end of July 2008. That’s a 63% gain in two months, says James Turk, an economist and New Hampshire-based editor of Freemarket Gold & Money Report.
Turk points to these stats at the Federal Reserve: total assets now and total assets on July 31. Those are some shmackadabum jaw-droppers. Click ‘em and see.
“Expanding the Fed's balance sheet is both inflationary by putting newly created dollars into the banks and also a debasement of the dollar,” Turk tells me. “It's taking bad assets from the banks and thereby debasing the central bank's balance sheet.”
So what’s a voldy mort to do? Turk, if you did not know, operates GoldMoney.com, where folks accumulate money in the form of gold grams. Turk also likes the UAE dirham and the Saudi Arabian riyal (oil currencies). Mostly, he likes the Chinese yuan.
Those who used to read The Calandra Report on my once beloved MarketWatch.com know about Everbank’s currency-denominated certificates of deposit. It’s a St. Louis bank, and the CDs come in many different currencies, tied to interest rates that are found in their respective nations.
These days there also are electronic traded funds that go long several separate currencies and baskets of currencies and short the U.S. dollar. One of these ETFs is the PowerShares U.S. Dollar Bearish Fund (UDN is the American ticker).
Note: My cosmos of holdings is listed on www.Stockhouse.com under the “portfolio setting.” We also own some British pounds, about enough for a good pub lunch. For more ThomWatch, please see ThomCalandra.blogspot.com.
THOM CALANDRA REPORT: For investors who profited from a meteoric rise of commodities, mining and life sciences companies, Thom Calandra acted as a beacon. Thom helped his audience find value in a quagmire of investment choices. Yet he is not a titled investment adviser. He is, more than anything, a scribe who goes where the action is. Thom co-founded and was the driving editorial force and spirit behind CBS MarketWatch, MarketWatch.com and the long-gone FT MarketWatch in Europe. As the voice of Thom Calandra's StockWatch and The Calandra Report, Thom beat bushes for prospects. He fancied $300-ounce gold before that metal became an investment rage. Thom visited numerous biomedical companies, metals mines, and even a haberdashery or two, not to mention thin-crust pizza joints across the planet in his search for profit, fashion and food. Thom's latest project, the novel PABLO BY NUMBERS, was completed in summer 2008. He and Stockhouse this autumn will offer a subscription report with bells and whistles. The service is tentatively titled Thom Calandra Report. Please stay tuned AND PRUNED to Stockhouse.com, ThomCalandra.blogspot.com and to ThomCalandra.com for more.
