Oops, They Did it Again ---- Consider The "Britney" Plan

Stimulus – Something that incites or provokes action

When the train wreck that's the Britney Spears soap opera rode a police-escorted gurney to Cedars-Sinai Hospital, celeb-mag sales spiked, traffic jammed gossip web sites, tabloid TV ratings rose and paparazzi photo prices surged. Britney's story is more than a public unraveling of a former Disney Mouseketeer. It’s about money: Every time she sinks to new lows, cash flows.

According to economist Dan Smith, a dean at Indiana University’s Kelley School of Business, bad-girl Brit is good for more than just another Hollywood headline. She’s an economic engine. Aside from the massive fortune she has amassed from her pop career or the nearly $737,000 she rakes in every month, Brit along with gal pals Paris Hilton and Lindsay Lohan, pushed up newsstand sales during the first half of 2007 one percent higher, to $2.39 billion. Spears is not just every celeb editor's dream come true. In fact, Brit's antics may hold the key to our economic recovery and be a viable fiscal alternative to the $146 billion economic stimulus plan the President is pushing Congress to rubber-stamp.

Consider this … George W. Bush is a “lame duck” president finishing his last year in office. In his day, “W” was known as a hardy partier. By his own admission, until he found Laura and the Lord, not necessarily in that order, he was a bonafide “booze hound.” Maybe it’s time that President stop looking to others to hoist the flag, and take one for the home team.

If Brit and her bunch can propel tabloid sales to new heights, produce scads of on-air ad revenue for the likes of “Entertainment Tonight” and “Inside Edition,” imagine the buzz and bucks that could be generated by “W – The Meltdown.” Throw in the true life perils of twin “angels” Jenna and Barbara, with the on-camera handwringing of a distraught Laura Bush, and you’ve got a boffo bonanza.

To hell with the $600 checks that the President and Congress want to mail out to the American taxpayer. Every red-blooded American would consider it his or her patriotic duty to lap up every minute of this juicy First Family saga. Flat panel TV sales would soar. Frozen dinner and snack food revenues would spike as Americans hunker down each evening to watch the next salacious installment. Madison Avenue execs would trample each other in the mad rush to book time slots. Ad revenues would be off-the-charts!

All of this would have the added benefit of making every American feel better about his or her lot in life. During the Great Depression, it was Fred Astaire, Ginger Rogers and Busby Berkeley who made us forget our woes. Today, as we reel from the subprime debacle, rising unemployment and a looming recession, a soap opera staring the First Family could be just the ticket.

As a sign of bipartisan solidarity, members of Congress could spawn their own scandals. They’re certainly not strangers to public spectacle. To complete their community service requirements, Jack Abramoff, Mark Foley and Larry Craig could be brought in as “technical” consultants.

By failing to implement sound fiscal policies to avert the current economic crisis, our elected representatives have brought shame to all of us. Now isn't it their turn. Bring on the paparazzi boys!



To learn more about my market recommendations, visit my website at:www.globewestfinancial.com.

French Toast

Stop me if you’ve heard this one … Q: How many Frenchmen does it take to defend Paris? A: Nobody knows; it’s never been done. Q: How many Frenchmen does it take to send the world markets into a tailspin? A: Just one.

On Monday, France’s banking giant, Societe Generale disclosed trading losses that may top $7.2 billion. Officials at France’s largest bank reluctantly admitted the mishap was the work of a lone 31 year old trader. According to European press reports, a junior bank employee, Jerome Kerviel, used his knowledge of the computerized trading system to circumvent security safeguards. Although Kerviel’s motives are unclear (he made no apparent personal profit from the trades), the episode was reminiscent of the 1995 scandal involving the collapse of Britain’s 240 year old Barings Bank at the hands of a single trader.

As details of the incident emerged, markets from Europe to Asia plunged. The news sent the Chinese markets into a free fall resulting in a 10% sell off while their European counterparts plummeted 5%. Fortunately, the U.S. markets were shut for the King Holiday. A similar fate on Wall Street was averted when Fed Chair Ben Bernanke flew to the rescue by slashing interest rates by ¾ of a point before the markets opened on Tuesday.

While the decisive action of Bernanke should be applauded, this incident further underscores the susceptibility of individual investors to circumstances beyond their control. It does not matter that Kerviel acted alone, or that French banking safeguards are slack. Rather it supports the simple wisdom of securing your portfolio through actual asset diversity.

No one disputes that Wall Street dodged a bullet. However, investors trading in markets other than the U.S. stock market saw significant opportunities to profit in spite of the alarming news from abroad. For example, on Tuesday, gold started the week below $850 per ounce only to close Friday nearly $60 higher at $910. Crude oil prices rose almost $5 closing to over $90 per barrel. Although the European calamity spurred the dollar make marginal advances against the Euro, the Canadian gained significant traction on the Dollar.

As the losses from the subprime debacle continue to pile up, the market has become hypersensitive. One Wall Street insider recently cautioned that, “the herd already senses the wolf and it won’t take much to spook em.” In other words, any negative news, no matter how attenuated, could trigger a “stampede.” When that happens, it’ll take more than a gun slinging, whip cracking Fed Chair action figure to keep the individual investor from getting trampled.

For a musical tribute to the Chairman, click on this link: It's a hoot!

To learn more about my market recommendations, visit my website at:www.globewestfinancial.com.

Our Frankenstein Economy

In the classic horror film, Mary Shelly’s gothic colossus is reanimated through massive doses of electro-shock. As bolts of lightning illuminate the silver screen, the Frankenstein corpse begins to twitch, and through the miracle of mad science is awakened from death.

After his resurrection, the creature (best-played by Boris Karloff) becomes like a doe-eyed child fascinated with flowers and the lost beauty of the world. But in a sad turn of cinematic events, the superstitious town folk are reviled by the great doctor’s marvel. In the tragic final scene, a mob armed with torches corners the creature in the village windmill, where his delusion life renewed ends in a pile of smoke and ash.

Apropos of the film (mea culpa for my second movie reference in as many weeks), the “mad scientists” in Washington are floating plans to stimulate our faltering economy. There appear to be as many proposals as there are lobbyists to promote them. The real hidden danger of any “stimulus” plan is the illusion that there is some type of predictive science that will produce a quantifiable outcome. Nothing could be further from the truth. In fact, if cornered and pressed to honesty, none of these otherwise well-meaning advocates could predict a certainty of result.

The prospect of a bipartisan deal briefly brightened Wall Street. But, at week’s end, the Dow fell nearly 500 points. During a speech to Congress, Fed Chair Bernanke gingerly told his audience that a well-designed and swiftly implemented stimulus package “could be helpful.” He, however, hedged his support of an economic jumpstart, when he said that “fiscal and monetary stimulus together may provide broader support for the economy than monetary policy alone.” As a self-aware man, the Chairman is forthright enough to acknowledge that no matter how well crafted the package, economic stimulus is by it very nature, a “crap shoot.”

The stimulus packages being pitched reflect a broad spectrum of political ideologies. Several conservatives lawmakers propose that the government grant additional tax cuts or provide direct tax rebates. On the other side of the aisle, liberals, urge a one-time cash enhancement to the monthly checks received by social security recipients. One group argues that any stimulus package must target low and middle income families. While the other advocates a package that jumpstarts corporate spending. The price tags for these proposed packages are just as varied as their proposed components. The projected costs range from a paltry $50 billion to whopping quarter trillion dollars! The sheer cost gap between the top and bottom ends of these proposals is further indicative of the inherent uncertainty surrounding the outcome of any stimulus package.

To complicate matters, Congress and the President also must weigh the questions of timing and the possible impact on the federal deficit. As Mr. Bernanke warned, a stimulus plan that kicks in too late or that worsens the structural budget deficit could be “quite counterproductive.”

As your father always taught you … don’t “throw good money after bad.” Apparently in an election year, the absolute truth of this advice is quickly forgotten. The federal government could scatter hundred dollar bills from the rooftops or drops bags of money from the sky. But unless we address the issues of our waning industrial base, long-term job creation and increasing the efficiency of resource use, we will be chasing good money after bad.

If the great minds of Washington and Wall Street are unable to agree, what course should the individual investor take? There is no question that the Washington and Wall Street insiders will push a package that protects their imbedded interests. This means that the savvy investors must be proactive to protect their portfolios.

Consider limiting your exposure by unwinding a portion of your stock market positions. Become more liquid. Find markets that are negatively correlated or actually non-correlated with the U.S. stock market. The big brokerage houses and hedge funds already are playing the foreign exchanges, precious metals, foreign currencies and indices. Why can’t you?

In this climate of flux and uncertainty, you must choose the type of investor you will be? Will you let the villagers chase you into the burning windmill … or will you decline the good doctor’s kind offer, and take responsibility for reanimating your own portfolio?

To learn more about my recommendations, visit our website at: www.globewestfinancial.com.

The "Golden Compass"

In the recent film by the same title (I’ll leave the celluloid reviews to Ebert & Roper), legend had it that an ancient “Golden Compass” could be used to foretell the future. The rub, however, was that only a select few with the inherited knowledge of its antediluvian alchemy could interpret its cryptic symbols. In the end, of course, only a beguiling blond child whose purity and innocence was beyond filmic reproach, held the key. To her alone, fell the task of defeating the great evil.

Such notions may be terrific Saturday matinee fare, but in the harsh truths of today’s global economy, we had better hope that the “tea leaves” may be read by a wider cast of characters.

Over the past several weeks, financial talk show hosts from CNBC to CNN have probed a parade of experts about whether a recession is upon us. Their responses are reminiscent of a famed First Amendment obscenity case heard by the U.S. Supreme Court. In trying to explain their definition of unprotected “hard core” pornography, Justice Potter Steward, opining for the majority wrote, “"I shall not today attempt further to define the kinds of material I understand to be embraced . . . but I know it when I see it . .” In other words, “objects in your rear view mirror may be closer than you think.”

This whistle-stop in our economy has created tremendous angst among analysts and economists alike. Inverted (down sloping) yield curves have historically been a reliable indicator that a recession was on the way. In past crises, we saw the inverted curve for what it was; an indication of high demand and liquidity, not a reflection of a market where interest rates had been pushed too far.

Tragically, Fed Chair Ben Bernanke has a much tougher situation on his hands than Greenspan had to deal with 3-4 years ago. Over the next several months, life will become very tricky for central bankers. While the choices are few, Bernanke now must navigate the economy through a literal minefield.

Deflationary monetary events like the one that can be precipitated by the subprime collapse, are far more perilous to a central banker than “garden variety” recession. The world’s central bankers simply do not have an adequate array of weapons in their arsenal to fight this battle. As history has shown, circa Japan 1990-2005, the slide from recession to deflation can happen in a blink. If this occurs, central bank intervention may be of little value. While the Bank of Japan eventually cut rates to 0%, there now is no dispute that it waited too long. Once confidence evaporates, the dominoes fall.

The only bright spot may be that no matter the action taken by the Fed, or other central banks, gold and other “alternative” investments may benefit. The virtual implosion of the U.S. Dollar since September has been the main driver for the stratospheric prices of gold. On January 15th, spot gold prices broached $900 and nearly reached $915 by day's end. Although the prices have since retreated below $880 (mostly on profit-taking), you need not be the keeper of “ancient knowledge” to realize that gold is on an inexorably journey to $1000.

It certainly can be argued that the “gold train” already has left the station. There is no question that those that had the foresight to purchase gold in 2001 when it passed the $300 mark, may be ahead of the curve. But very few of us (including yours truly) believed that the economy could sink to such depths or that gold would push to the pinnacle it now has reached. Even in the dark days following 9/11, did any of us believe that we would see the type of tectonic shift we now are seeing in the economy.

Against this backdrop, investors are faced a decision that may be problematical. Do they ride out the storm in hopes that the economy will find new ballast? Or do they abandon ship? In its best light, this is no more than a classic “Hobson’s Choice.” Consequently, crafting an investment course in the middle ground may be the only prudent path.

The stock market will find a bottom. When it does, investors who are liquid will be an advantageous position to make great buys. Until then, however, investors must look elsewhere to build and retain wealth. Although I believe that gold still is good bet, I think silver and platinum have a similar upside. With Asian demand on the rise, commodity prices will continue in an upswing. Likewise, as emphasis away from the dollar as the world’s only reserve tender edges forward, investors should eye other currencies as an alternative. For example, yesterday, the Swiss Franc rose to a record high against the dollar as speculation of financial-sector losses swelled and the Euro flirted with 150.

Perhaps there is a “Golden Compass,”

For more information on my market recommendations, visit our website at:www.globewestfinancial.com.

To Cut or Not to Cut ... That's Not the Question!

In the upcoming weeks and months all eyes will be on Fed Chairman Ben Bernanke. Will he be bold and begin dramatically slashing interest rates --- or will the continuing fear of inflation force him to proceed with caution?

As the post holiday numbers roll in, it’s becoming clearer that we are an economy in retreat. Only WalMart, among the major retailers produced positive figures. All the rest, including Target, Macy’s and Penny’s showed significant declines. With core inflation on the rise, driven chiefly by record oil prices and the specter of crippling credit card debt, consumer and investor confidence in the economy has begun to slip. The burning query is not if the housing market will continue to plummet, but how far.

Most economists are reluctant to utter the “R” word, for fear that it becomes a self-fulfilling prophecy. But, of late, the most dreaded letter among economic prognosticators is “D” for deflation.

To this point, the Fed’s seeming pre-occupation with inflation is akin to rearranging deck chairs on the Titanic. The greatest hazard to this economy is not the soaring price of ethanol, but the probable cascade in home prices, durable goods and ultimately, the stock market.

Throughout the tenure of former Chairman Alan Greenspan, the “Inflation Hawks” ruled Fed policy. Greenspan, however, governed the Fed during an era of relative economic growth and expansion. Today’s economic climate harkens more to the dark days of “stagflation” presided over by Greenspan’s predecessor Paul Volker. The only palpable difference between then and now, is the skyrocketing interest rates that dominated the late seventies.

Despite the fact that all economic road signs continue to point the way towards recession, and likely much worse, most investment professionals continue to blindly cling to their ingrained belief that nothing could possibly derail the U.S. economy or significantly reduce the value of U.S. assets. Apparently, there is no end to their paradise of self-delusion.

Likewise, until now, federal policy-makers have been all but oblivious to the economic “red flag” warnings in the economy. Despite the continued evaporation of home equity, record consumer debt levels and drooping retail sales, Washington has “stayed the course.” The President, and his team of crack advisers, still contend that the fundamentals of the economy are solid. They have ignored the recent surges in oil, gold and other commodities, and argue that rising exports resulting from a weaker dollar is sufficient to keep the recessionary forces at bay. But as the effects of the subprime crisis spill over into the rest of the economy, and unemployment grows, the Fed along with Treasury will be backed into a corner.

In his first speech of 2008, the Fed Chair finally acknowledged the dire straits for which the economy is headed. . He more than subtly hinted that further interest rate cuts are in the offing. Although Wall Street posted a positive response after his remarks, it is unclear whether the rise in the Dow was more a result of the speculation that Bank of America may acquire troubled mortgage lender Countywide.

If Fed Chair is to act, he must act boldly. Even a half point cut such as the one implemented in November may not be enough. If the goal is to stimulate investment and to rescue distressed borrowers, then he must cut deeper. With the current Fed Funds Rate at 4.25, his target should be a drop to rates by at least two full points by the end of the third quarter.

According to reports, the Fed Chair has carefully studied the Japanese economic recovery in the wake of its own real estate collapse. Part and parcel to their package, were interest rates, which at half a point, still are among the lowest in the industrialized world. These low rates not only have stimulated Japanese borrowing and investment, but also created a vibrant secondary market for Yen. (Global “carry traders” have been borrowing in Yen only to reinvest it in instruments with higher yields.)

Whichever option the Fed chooses, the impact on the purchasing power of the dollar will be substantial. While it is unclear how this scenario will play out in the economy, I would encourage investors to begin diversifying away from dollar denominated assets. This means that portfolio’s constructed primarily of inflexible mutual funds are most at risk. In addition to foreign stocks, investors ought to give serious consideration to hard assets such as gold, foreign currencies and commodities. If you plan to continue holding positions in the stock market, then hedge your portfolio with index funds. The advantage of a well-managed index fund is that it can benefit the investor in both “bull” and “bear” conditions.

Don’t be thrown by the volatility of these alternate markets. In my way of thinking, it’s better to brave the risks of a new market than to run the risk of a complete portfolio meltdown.

To learn more about my market recommendations, visit our website atwww.globewestfinancial.com.

History is a Harsh Mistress

During the first stock trading week of the New Year, the Dow dropped nearly 500 hundred points. This down turn may be good news for post-holiday “bargain shoppers.” But rough reality is that this may be a preview road ahead as the markets come to grips with the growing losses associated with the sub-prime meltdown.

Frequently, as investors, we forget the basic equation … that for every buyer, there’s seller and for every winner there must be a loser. If this simple calculus is undermined, markets may become skewed and investors tentative.
While the multitude of bailout measures urged by the President and Congress to stave off a further wave of foreclosures and bank write-downs may appear to be the right think to do, such intervention may cause more long-term economic harm than good. The unintended consequence may be an artificial distortion of risk that deters rather than encourages future investment.

Healthy markets have a “natural order.” Risk and growth go hand-in-hand. Weak investments must be permitted to fail no matter the consequences. If the government intervenes in markets whenever it believes it has a “moral obligation,” this upsets natural order and will engender market confusion. Every gardener knows that a tree must be pruned to stimulate growth. The same analogy is true in the investment marketplace. Bad investments must be shed to before markets can progress.

The advent of low interest rates combined with rising property values precipitated an unprecedented boom in the real estate investment. Home ownership is at its highest level since the end of World War II. But because investment capital is by its very nature a scarce commodity, this flood of dollars into the real estate sector has taken its toll on the rest of the economy.

Real estate investment may lead to the development of personal wealth, but in the long run, does not promote economic progress. Investment in real property does not promote the development of marketable products or sustainable job growth. Consequently, unless and until the unproductive capital currently captive in the real estate sector is exonerated, this economy will remain stagnant and uncertain.

Historically, recessions can be triggered when economic illiquidity is combined with run away government spending and shrinking tax revenues. A protracted trough can be averted if unproductive investment capital is disgorged back into the economy. Under these circumstances, government intervention may not only prolong the economic malaise, but potentially deepen the impact.

A recent example of this economic phenomenon transpired in Japan. The export driven expansion in the 1980's stirred an insatiable Japanese appetite for real estate. Property prices in Japan and abroad inflated in concert with the Japanese buying spree. Japanese banks and investment groups dominated the real estate market in major cities across the globe. This absorption of available investment capital led to a shortage of Japanese liquidity. Instead of allowing the economic forces to take their "natural course," the Japanese government propped up the banks by injecting additional liquidity into the system while at the same time ignoring sound credit practices.

When the real estate "bubble" finally burst, Japan, Inc. was brought to screeching halt. The Japanese economy quickly slid from recession into a lingering deflationary period. This means that persistently declining prices actually retarded continued economic expansion. The impact was widespread. Although the Japanese economy now has regained some of its former luster, this did not occur without substantial economic pain.

Like the Japanese, the U.S. economy is at a crossroads. Should the federal government step in to prevent a collapse in the real estate sector as the Japanese did, or do we allow the economy to take its natural course? While deeper interest rate cuts by the Fed and the injection of additional liquidity into the capital markets may be politically expedient, especially in an election year, it may amount to nothing more than putting a Band-Aid on a bullet wound.

Everyone agrees that home ownership is a virtue to which any economy must aspire. With it comes a sense of national pride and prosperity. But if home ownership is not the byproduct of a fundamentally sound economy, then it ultimately may do more economic harm than good. The hard truth is that sustainable prosperity cannot be conjured by a patchwork of governmental policies. Even in the new alchemy of today’s financial markets, gold may not be spun from an economy that is threadbare. To attempt to do otherwise is to ignore the hard lessons of history.

To learn more about my market recommendations, visit our website at: www.globewestfinancial.com.

New Year ... New Dollar?

In 2007, the Dollar had its worst year in recent memory. As the housing crunch and credit woes gripped the U.S. economy the dollar's long slide picked up momentum. This culminated in a record-breaking rout of the dollar toward the end of the year. In November the dollar fell to a record low against the Euro, with the British pound reaching a 26-year high and the Canadian trading a levels not seen in a century. When the dust settled at year's end, the Euro had gained 9.6% against the dollar, while the Canadian picked 14.8% in value. Although the gains were not as dramatic, the Yen settled 6.4% higher on the dollar when the ball dropped on the new year.

The main reason why we have seen such remarkable strength in the Canadian and Euro is not because of stellar economic conditions in Canada or Eurozone, but because of the deteriorating economic conditions in the US. Although the housing market had been struggling for months, its true problems did not surface until the third quarter. Bad loans, particularly in the sub-prime sector, increased significantly, and in late June, leading banks on Wall Street began to report major losses for their hedge funds. In July, AXA Investment Managers closed one of its funds to new investors, BNP Paribas suspended three of their funds, Goldman Sachs was forced to rescue one of their funds and Sentinel, a major US money manager halted redemptions. A snowball affect was seen across the financial markets creating a liquidity crisis that forced the European Central Bank and the Federal Reserve to pump billions into the financial system. The subprime crisis then went global, hitting hedge funds and mortgage lenders in countries like Germany, Australia and the UK. Australian mortgage lender RAMS Loans Group saw its shares crash 60 percent in the middle of August as the US credit squeeze left the lender unable to refinance $5 Billion in debt.

Unsurprisingly, this chain reaction led to a wave of layoffs in the financial sector. America’s biggest mortgage lender Countrywide Financial cut 12,000 jobs. Citigroup warned of 60 percent earnings drop in the third quarter while UBS disclosed $3 billion worth of losses. In the month of August, non-farm payrolls fell by 4k, the first drop in four years. Consumer confidence fell to a 2 year low, driving retail sales excluding autos down 0.4 percent. All of these factors stoked fears that the US economy could fall back into a recession. The risk as well as the conditions in the credit markets and the deterioration in economic data forced the Federal Reserve to cut interest rates for the first time since 2003, but the tables turned in October.

The credit markets began to stabilize, the spread between US Treasury and junk bonds receded from its highs, the stock market rebounded 800 points following the interest rate cut and the non-farm payrolls report for the month of September signaled stability in the labor market. All of these factors have shifted the market’s expectations for future interest rate cuts significantly. Fed fund futures went from pricing in 50bp of easing by the end year to only 25bp by Christmas.

When a central bank lowers or increases interest rates after remaining on hold for many months, their first action is usually not their last. In the case of the Federal Reserve, they have cut interest rates after remaining on hold for the past year and we still expect them to deliver more as we come into the new year. The losses already booked by several major banks including conservative institutions such as the Swiss-based UBS and Wells Fargo do not bode well for the future of the financial markets. The housing market is already in a downward spiral as inventories rise while new, existing and pending home sales continue to decline. The retail figures following the Christmas shopping season are not yet finalized. But from all preliminary reports, the outcome figures will be substantially less than expected. This means that we will see continued slippage in the stock market, which in turn embolden the Fed to continue cutting rates. As this happens, the dollar will continue to weaken against it major counterparts.

Inflation pressures are a serious concern for the Fed not only because commodity prices have hit record levels, but the US dollar is also weakening. Oil has been emblematic of the bull market in commodities, hitting a record $100 a barrel on January 2nd. In response, gold in turn hit a record high just shy of $870 per ounce. High energy prices have also driven basic food commodities such as wheat and soy beans to new contract highs. In mid-November wheat touched a record $10.00 a bushel. The full impact of escalating commodity prices still have not been fully realized nor does the uptrend appear to be over. On January 3rd, the usually circumspect Nabuo Tanaka, Executive Director of the International Energy Agency released a report projecting energy supply and demand pricing for 2008. Based on Asia's burgeoning demand propelled primarily by China and India, his agency said it would not be surprised to oil at $150 a barrel.

Do not expect US officials to stand in the way of further dollar weakness. With rising commodity prices, the US economy needs a weaker dollar. Not only does that increase foreign demand for US goods, but it can also spur renewed foreign investment. There are three different ways that foreign investment can help buffer any slowdown in the US economy and the US dollar. Over the past few years, foreigners have been big buyers of US real estate. According to a study by the National Association of Realtors, about one in five American real estate agents sold a second home in the year ending April 2007 to a foreign buyer. A third of these buyers come from Europe, a quarter from Asia and 16 percent from Latin America. As the US dollar continues to fall in lockstep with house prices, foreign buyers could provide the support that the US housing market needs to avoid a major crash. The second support could come from the US equity markets.

If the dollar continues to fall, foreign investors may begin to acquire companies with sound fundamentals that are also less vulnerable to a US economic slowdown. Both of these factors are contingent upon the US dollar showing signs of stabilization. Foreign investors will only swoop in with size when they believe that dollar weakness is nearing an end. The third factor is less contingent upon the outlook for the US dollar which is that a weaker dollar also makes US corporations more attractive buyout targets. Sovereign wealth funds of countries like China and Dubai are flush with cash and they are on the lookout for good investment opportunities. These funds already have demonstrated their hunger for U.S. assets.

As the first quarter opens, there are more questions about the dollar's continued value than answers. If commodity prices continue their uptrend, then clearly asset-based currencies like the Canadian will benefit. If the Japanese economy continues to demonstrate its solid fundamentals, then it too reach higher against the dollar. Both the politics and economy of the Eurozone are less certain. Higher commodity prices will put a damper on growth in Europe. Politically, however, the European Central Bank under the leadership of Jean Claude Trichet has shown a willingness to let the Euro inflate without intervention.

The bank's inaction may be as much about vanity as it is about the numbers. Europeans dream about a day when their currency will be on an equal footing with the U.S. Dollar. This political goal alone, may be enough to push the Euro to new heights above the 150 threshold versus the dollar. Given this understanding, I recommend staying long on the Euro, Canadian and Yen. I would look for oil and commodity prices to continue their uptrends, and would not be at all surprised to see gold pierce $1000. At all points, be wary of intermediate profit taking. Book your profits early, cap your losses on corrections, and don't be afraid to embrace the risk by buying into market weakness. As the legendary financier Baron Rothchild was fond of saying, "Buy when there's blood in the streets." Hold on ... 2008 is going to be a wild ride!

To learn more about my market recommendations, visit our website: www.globewestfinancial.com.