The Dollar Goes "Down-Under"

It’s like the celebrated tail of the beloved Dutch figure Hans Brinker --- the little boy who saved his town by putting his finger in the dyke. According to legend, as the fair-haired child was returning home from gathering wildflowers, he spied a leek in local levy. Seeing no one to help, he thrust his chubby finger into the breach. Wooden clogs and all, he remained at his post through the chill of night until through an act of providence; a local clergyman heard the child’s moans and brought the town engineer to plug the hole.

Unlike this charming Dutch story, the mere selfless heroism of a single champion will not be enough to hold back the torrent of bad news for the U.S. economy and specifically, the U.S. Dollar. While the President and his minions have promoted their promised rebate as the proverbial "finger in the dam," to most observers, it's easier to see the finger than the hole it's supposed to plug.

Battered by new fears of a recession, the U.S. Dollar is falling at a record pace. On Thursday, the Dollar sank to record lows against Euro, marking a multi-year slide in which the European currency has gained more than 40% against the beleaguered greenback. At the core of this turmoil is not just the deepening subprime housing crisis, but a continued surge in commodity prices, and in particular crude oil. With oil prices holding above the $100 a barrel benchmark, consumer confidence has plummeted.

Despite its stratospheric prices, oil has been a laggard compared to several other commodities. To date, natural gas prices are up 26%, coal has risen 56%, platinum has gained 41%, wheat has soared 41% and even an “exotic” commodity such as cocoa has swelled 38% in price.

Although the world may not be able to abandon the dollar as the “global” currency, the trade opportunities associated with selling dollars against other denominations are vast. While the Euro and Canadian will likely continue to rise against the Dollar, other currencies such as the Japanese Yen, Aussie and Kiwi (New Zealand Dollar) will likely see similar gains. In particular, I think that “commodity-based” currencies like the Aussie and Kiwi will see the most action over the next several months.

Australia, for example, has what the world wants --- I’m not referring to leggy blondes in bikinis --- coal, uranium, gold, silver, copper and other strategic metals. In July, the Aussie broke above $.85, and it hasn’t looked back since! Key currency analysts from ABN Ambro to the Royal Bank of Scotland are projecting the Aussie to hit parity with the U.S. Dollar by mid-spring, if not before. In the FX or foreign exchange market, traders can reap up to a $1000 for every penny rise in the Aussie’s value against the U.S. Dollar for every position they hold. With the Aussie currently trading at approximately $.94, this trade is attracting very significant attention, and it should attract yours.

Throw another shrimp on the barbie mate!



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

Over a Barrel at $100?

One hundred is a great number. If your baseball team wins 100 games, you start waiving your victory pennant. If your favorite TV show reaches its 100 episode milestone, you pop the champagne corks. If you’ve got 100 candles on your birthday cake, you’ve beaten the odds. But when the wholesale price of crude oil hits a hundred bucks, is it time to raise the white flag?

No! It’s time to change your investment strategy.

Yesterday’s historic close of the crude oil at a whopping $100.10, left the market breathless. Is this an anomaly, or is it the new reality?

In my view, we may be looking at oil in the $120-to-$150 area by the end of the year. It's not just oil; all commodities are moving higher. Soybeans are at $14 a bushel and platinum at $2,000 an ounce. Platinum, soybeans, gasoline and heating oil all reached records yesterday, as hedge-minded investors poured money into the commodity markets. Propelling this rise is a falling dollar which has lost 10 percent of its value against the euro over the past year as the Federal Reserve cut U.S. interest rates.

At this point, if you’re the Fed Chair, you can “pick your poisons.” The deepening housing slump is pushing the public perception of an impending recession. Yet with consumer prices on the rise --- up 0.4% since January on top of a similar increase from December --- the inflation genie may be out of the bottle.

As we approach the end of February, commodities are looking like the best bet in the investor marketplace. Last year, as the Fed cut rates and the dollar fell, gold surged 31%. With no rate hikes on the horizon, gold and other precious metals such as silver and platinum will likely continue to benefit.

In addition to precious metals, the commodities market is being led by the agricultural sector. There is no question that soybeans, corn and wheat will pull back from their historic highs as we approach the spring planting season. However, increased export demand combined with significant production decreases in overseas growing --- particularly in China --- and the prospect of escalating energy inputs, should drive prices higher. During this past week as the realities of severe weather and decreased domestic planting became apparent, the Chinese locked in soybean purchases at record levels. In the coming year, I think these supply and demand conditions will persist.

So, with oil prices settling into a new reality, is it time to surrender or is this an opportunity for those few individuals willing to alter their investment strategies? I say we pop the corks, waive the pennants and blow out the candles!

Check out this piece of monetary nostalgia. Simpler times --- a friendlier dollar.



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

Top Ten List ... How I'm Going to Spend My Rebate

Just this week, after little debate, and a lot of fanfare, President Bush signed his $168 billion emergency economic recovery plan into law. Under the plan, individuals making up to $75,000 a year will receive a rebate check for $600, while couples earning up to $150,000 are eligible to get $1200.

Like most Americans, it so rare to get change back, that I’ve had to do some soul-searching to prioritize how I will spend my refund while at the same time upholding my patriotic duty to help our ailing economy recover.

Here are my "Top Ten" picks:

10. Buy a removable disguise for Federal Reserve Chairman Ben Bernanke so that he can cash his paychecks at any bank without being recognized.

9. Get yoga classes for House Speaker Nancy Pelosi so that she can keep bending over backwards for the President.

8. Sign-up for a one year subscription to a credit repair service for the U.S. Treasury. After all, if they’re going to borrow against our children’s future, the least I can do is help them get a better credit score.

7. Get a tank of gas for my Chevy Suburban. With a fill-up, you get a free car wash and one of those plastic air fresheners shaped like a tree to dangle off your mirror.

6. Throw a pizza party for my accountant because this will be the first time I’ve gotten a refund without having to use it to pay his bill.

5. Make a $600 down payment on a $4000 flat panel TV so I can watch bigger than life summer re-runs of “Deal or No Deal.” I’m told that hi-def lets you see the secret clues the network projects each week on to Howie Mandel’s shiny dome .

4. Make a $600 down payment on my new vacation house in Detroit. For $1200, I may be able to get a 2-fer.

3. Buy $600 worth of shares in troubled mortgage lender Countrywide Savings. Hey, it’s simply good business to buy low-sell high!

2. Send a $600 donation to GOP presidential nominee John McCain just because it will piss-off Rush Limbaugh.

1. Establish a 24-hour consumer hotline in Shanghai so that the Chinese can tell us how they really want us to spend our $600 rebate.

As you can see, I haven’t yet made up my mind. In the coming weeks as all of us continue to check our mailboxes, please let me know how you plan to spend your rebate. I'm open to your suggestions.



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

What is a "Bridge to Nowhere" Alex ...

In the popular TV game show “Jeopardy,” host Alex Trabek chides the competitors to "answer in the form of a question," rather than chime in with correct answers. To the uninitiated, the show’s canned format seems cockamamie. After all, from the moment we hit kindergarten until our dying breath, we're programmed to seek the right answers. To hell with the questions. We want the "gold star" for getting it right.

Like eager children, our elected leaders reflect the one-track orientation of the voters. In their quest to find the “right” answer to our economic downturn, leaders from the Oval Office to the Speaker’s Chambers were quick to whip out our national checkbook. Hailing their own bi-partisan cooperation, the President and Congress ballyhooed the cockeyed notion that a $600 rebate was the key to jump-starting our sluggish economy. According to their twisted logic, once American consumers get this whopping tax rebate, they’ll rush out to buy a flat panel TV so that they can watch Jeopardy in high def.

Now, pan the cameras north to Alaska. Visualize a double span, rising to 200 feet above ocean level, going from Ketchikan, Alaska (pop. 14,500) to Gravina Island (pop. 50 on a good day). The only thing of note on the island is Ketchikan's airport, which has six passenger flights most days --- maybe a few more during the summer. The ferries between Ketchikan and the airport run half-filled. And Ketchikan isn't even connected to the North American road system; if you go more than 10 miles from town, you run out of road.

Dubbed the “Bridge to Nowhere,” this $200 million dollar project became a national symbol of “Pork Barrel” run amok. But on closer examination, boondoggles like the Ketchikan Bridge, may actually be a better solution to the nation's economic malaise than the proposed rebate checks.

There is no question that America’s infrastructure is crumbling. Most of our roads and bridges were built around the time Elvis was king of the airwaves. Last year’s tragic collapse of a critical span over the Mississippi in Minneapolis is merely emblematic of the problem. A recent study by the American Society of Civil Engineers (“ASCE”) confirmed that about 25% of the nation’s 600,000 bridges are deteriorating or structurally deficient.

The linkage between the state of our infrastructure and industrial competitiveness is undisputed. Innovation and re-energized productivity, however, are meaningless if the goods produced can’t make it to market in a timely and cost-efficient fashion.

When queried about the efficacy of the proposed $150 billion rebate program, GOP presidential hopeful Mike Huckabee joked that the money might be better spent widening the I-95, the interstate that stretches between Maine and Florida. While Huckabee’s chances of reaching the White House may be DOA, his flippant answer may hold particular merit.

During the “Great Depression,” building roads and highways was a key component to our economic recovery. Although the strain on the federal budget was astronomical, in the end, jobs were created, the economy was stimulated and we were left with a national system that not only gave us the ability to better fight a future world war, but positioned our nation to become an industrial power.

I am not suggesting that we fire-up the WPA. But, in light of our current economic slide, a closer examination of its salient principles may be warranted.

This year, President Bush is requesting another $368 billion to fight the war in Iraq on top of an additional $200 billion to wage the fight in Afghanistan. According to the Congressional Budget Office, by 2017, the cost of these wars is projected at reach an unthinkable $2.7 trillion.

On the heals of 9/11, no one contends that the threat from Al Qaeda isn’t real. But what’s the genuine value of fighting the war abroad, if we’re losing the war on the home front?

As the painful reality of the coming recession takes hold, Alaska’s “bridge to nowhere,” is looking like the right answer. Thanks Alex.



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

Year of the Rat

Since the Dark Ages, rats have been an enduring symbol of disease and degradation. Mice are cute. But rats are described as vermin and their mere presence is referred to as an infestation. No gritty portrait of post-industrial London, Paris or New York is complete without the sickening image of these beatty-eyed creatures lurking amid garbage pales and gutters. When we think of rats, we see the images of “Willard” and “Ben.”

I think rats have gotten a bum rap. As any biologist will tell you, rats are clever, adaptive and resourceful. Unlike humans, rats always find the cheese. Recently, the creative folks at Disney-Pixar have tried to rehabilitate this reviled rodent by giving him a chef’s hat and a ginzu knife. But let’s be honest guys --- even the most macho among us gets the “willies” when a rat suddenly scurries across our path.

Chinese legend has it, that when the Buddha called the animals to come before him, only twelve complied. Seeing the procession of creatures, the rat sensed an opportunity, and hitched a ride on the back of an ox. When the animals arrived before the sage, the rat hopped off and was first in line to gain his wisdom. As a result of his gumption, the rat occupies the revered position as year one on the Chinese astrological calendar.

This story may be emblematic of the true differences between East and West. Like the rat, the Asian economies, and China, in particular, have shown great resourcefulness and adaptability. Although they still are a “communist” nation, the Chinese seem to find profit in everything. Nothing in the stream of commerce is too small for them to duplicate or manufacture.

The dizzying economic growth in China is producing more millionaires at a faster pace than anywhere else on the planet (closely followed by India). Shops that once hung roasted ducks in their windows and reeked of exotic medicinals, now are adorned with Gucci bags and are scented by French perfumes. Chinese streets that were jammed with bikes and rickshaws are now bumper-to-bumper with Mercedes moguls smoking Cohibas. Is the Chinese economic miracle mere good fortune or is it evidence of something more fundamental?

America was once the “factory to the world.” Innovation was the hallmark of American industry. Today, however, manufacturing jobs are shrinking at an alarming rate with the majority of Americans being employed in the service sector. Did we get lazy; did we lose our edge; or did we simply fail to adapt? Whatever your answer, much may be learned from the lowly rat.

Instead of lamenting the falling dollar, we ought to embrace it as an opportunity to build our export markets. Rather than mourn the loss of American jobs to foreign shores, we must push back with new and better products that are geared to the rapidly changing marketplace. For example, in recognition of the rising demand for environmentally friendly goods, consumer giant Clorox recently released its “GreenWorks” line of cleaning products. Since the 70’s, we have known that the development of domestic renewable energy sources not only will loosen the stranglehold of Middle-East oil, but foster a whole new class of American jobs.

Not so long ago, frogs were synonymous warts. Today, Kermit, America’s best known amphibian is the spokesman for Ford’s new line of “green” vehicles. Maybe with the arrival of “Year of the Rat,” it’s time we stop thinking about this four legged rascal as pest to be exterminated, and instead, exalt him as the symbol of the new American prosperity. Gung Hei Fat Choi!



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

Phil Sees His Shadow --- Groundhog Day for the Economy

PUNXSUTAWNEY, PA – In an annual pageant that is equal parts pomp and absurd theater, America’s number one underground prognosticator Punxsutawney Phil pronounced a continued downturn in the U.S. economy. Despite low clouds, fog and a freezing drizzle, a record crowd of 30,000 devotees gathered at Gobbler’s Knob to witness Phil see his shadow and issue his prediction of economic gloom. Phil is the direct descendent of a long line of gnostic groundhogs whose forecasts since 1887 have had an uncanny accuracy rate of nearly 80%. In a rare interview, our crack staff at Globevest caught up with this uncommon rodent to get his views on the state of the American economy.

GV: Before we get started, could you tell our readers a little about your background?

PP: Sure. After graduating cum laude from Wharton---I was classmates with Hank Paulson [Treasury Secretary] --- I took an entry level analysts’ position with the Philadelphia Fed. My folks, of course, were a little upset that I didn’t go into the family business. Dad worried that I might get buried in a mid-level cubicle … I digress. Anyway, after my twin brother Paul was implicated in the Duke Brothers’ [Randall and Mortimer] foiled attempt to corner the frozen orange juice market through bogus projections of an extended winter freeze, I was forced to abandon my career with the Fed and return to Gobbler's Knob.

GV: For years, your predecessors stuck to predicting the length of winter, what made you shift your focus to the economy?

PP: As you know, the only discipline less accurate than meteorology is economics. I thought, why not, predicting the economic climate could be a real growth industry. Besides, it’s tough to compete with the Farmer’s Almanac.

GV: In your view, is there any one factor that is casting the longest shadow over our economy?

PP: I would say that there are a number of alarming factors, but the recent ISM (Institute of Supply Management) figures showing a sharp decrease in non-manufacturing service sector business activity is particularly troubling. As you may know, an ISM reading below 50% is a strong indicator that that sector of the economy is contracting. January’s fall to a reading of 41.9% was a dramatic drop-off from December’s 54.4%, and the projected 53% figures expected by most economists. As you know, the majority of Americans are now employed in some aspect of the service economy, and this is a disturbing sign that this sector has reached the end of a long period of growth.

GV: Are there other major indicators that propelled you prediction of economic gloom?

PP: Although crude oil prices have pulled back from their record highs, inflated commodity prices are still putting a damper on the prospects for economic growth. In spite of lower energy prices, consumers have not seen much relief at the pump or in their grocery aisles. Moreover, if the frigid winter conditions persist throughout the mid-west and east, it is likely that we’ll see another spike in retail energy prices. Even with the promise of cash rebate from the federal government, consumers appear to be holding back.

GV: Do you see any bright spots on the horizon for our economy?

PP: So far Fed Chair Ben Bernanke has acted decisively and is ahead of the rate cut curve. But he must be judicious because he only has limited ammunition. A declining U.S. Dollar should help jumpstart our export market. A weaker Dollar has the added ancillary advantage of narrowing our foreign trade accounts deficit, at least on paper. It will also keep pressure on the Chinese to finally let their currency be marked to a true global market rate. Theoretically, if the Dollar continues to fall and the Chinese don’t uncouple the Yuan, they risk seriously eroding the buying power that has been built-up through their burgeoning export machine.

GV: Before you retreat for another year, are there any recommendations you would give our readers.

PP: First of all, you can’t bury your head in the sand! That’s easy for me to say, because I’ll be tucked away in my burrow safe from the twists and turns of the economy. All things being equal, however, I would encourage investors to lighten up on U.S. backed equities for the time being. By the same measure, I am not particularly sanguine about the gusto of foreign stocks. It may be a wiser to use this opportunity to diversify your portfolio into other asset classes, namely, commodities, currencies or even precious metals. Even with its recent correction below the $900 mark, I believe that by the time I emerge in search of my shadow next year, gold will have topped $1000. If you are going to remain in the equities market, use mechanisms that allow you to benefit in both bull and bear conditions. With the reduction in interest rates, this also may be good last chance to refinance. I’m not sure I would recommend buying additional properties, because I believe that real estate values have yet to find a bottom.

GV: Thank you taking the time to talk with us. I know you’re pretty busy getting ready to hibernate.

PP: My pleasure. Hopefully, by the time we meet next year, the economy will be on better footing.



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

The Patriots Should Take a Dive for the Home Team … America

I’m a sports fan. I’ll watch anything competitive, except chess and poker. I root for the home team, but if I don’t have a team in the fight, I’ll pull for the underdog. Even though Los Angeles hasn’t had a football team since Al Davis skulked back to Oakland, I’ve always been a 49ers fan. It doesn’t matter whether John Brody or Joe Montana were slinging hash, the Niners have always been my boys. That being said, I approach Sunday’s contest not so much as a fan, but as an American patriot.

Each year, economists have observed the phenomenon known as the “Super Bowl Effect.” This occurrence has little to do with the pre-game spike in big screen TV purchases or the annual upswing in nacho cheese sales. It has nothing to do with multi-million dollar economic impact the contest has on the host city. Even though the sales of cholesterol inhibitors generally rise following our national day of gluttony, this not the effect economists track. Rather, history has demonstrated that if an AFC teams wins, the economy dips and if an NFC team prevails, the markets climb. (Luckily for me, the 49ers play for the NFC.)

The empirical evidence of this singularity is difficult to refute. During the 1970's and early 1980's when the AFC dominated, and the economy was weak. As the balance of power shifted to the NFC (thanks in large measure to my 49ers), the economy staged a remarkable recovery. Now with the return to preeminence of AFC teams such as the Ravens, Patriots, Steelers and Colts, the economy has plunged.

Econometrics specialist and self-confessed nerd Mike Moffatt conducted a statistical study to determine if there was any truth to the myth. Moffatt looked at the result of the last 39 Super Bowls. From his research, he concluded that there is a statistically significant correlation between the Super Bowl result and economic growth. For those of you that are mathematically inclined, Moffatt demonstrated that there was a .074963 correlation between an NFC victory and economic growth.

The “Brady” bunch may have a date with destiny, but their pursuit of a perfect season puts them on a collision course with our economy. Patriot owner Bob Kraft is no one’s fool. He’s a Columbia graduate and holds an MBA from Harvard. Kraft made his fortune as a captain of industry and through savvy investments. Pride may propel him to push his Patriots to historic heights. But at what cost to himself and our economy. As our nation tips towards a recession, Kraft of all people should see the bigger picture.

Bob, before the game, take Bill Bellichek aside, show him the stats. He’s a bright guy. If need be, offer him a bonus if he ditches his playbook. You can always write it off your taxes. Send a memo to Tom Brady telling him that the venue for the game has been switched from Glendale, Arizona to Glendale, California. Whisper to Randy Moss that he’s been traded for Terrell Owens. Drop the word that you think Rodney Harrison and Junior Seau should be put out to pasture.

Your bottom line and ours, depends on your willingness to trade your vanity for true patriotism. Despite the recent referee scandals plaguing the NBA, I assure you the Justice Department will look the other way. Come on Bob ... Take one for the home team ... America.

GO GIANTS!

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