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Stock Ideas Top Headlines Your dollar will lose more value !
Stock Ideas Top Headlines Your dollar will lose more value ! 
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| We were discussing the LIBOR problem Wednesday night at dinner in Baltimore. We reserved the corner table at Pazo... one of the fancy restaurants in town. We invited a few friends and hosted a potential new hire. | |
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| Your dollar will lose more value ! |
| Tuesday, 25 September 2007 | ||||||||
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Dear Reader, Just a quick look at my Wealth Advantage portfolio confirms the boost overseas markets got from the Fed. Of the six overseas companies in this portfolio, five gained six percent or more, with one of them gaining 12 percent. My U.S. stocks were also energized. One gained 12 percent and another six percent, but overall these seven companies didn’t do nearly as well as the overseas ones. Still, for every $100,000 invested in the portfolio, you’d be $6,700 richer today. For one week, that’s not too shabby. That’s the upside. Unfortunately, it comes with strings attached. For one thing, it opens the door to inflation. For another thing, it may have put an end to a mild correction now. But it also increases the chances of a much bigger correction later. If you think things were getting bad, you haven’t seen anything yet. A recession means the job market contracting not just by 4,000 jobs, but by tens of thousands of jobs.
And if inflation is let loose by the Fed’s action, the price of oil could easily zoom past $100 based on what the dollar was worth in 2006. Before the Fed intervened, the market – on its own – was getting rid of too many dollars floating around the U.S. economy. It’s a painful process. It punishes lenders and borrowers who crossed the line of safe lending practices. It also punishes investors who made risky bets. These people were counting on easy money continuing indefinitely, and of course it never does. It won’t in this case, either. But these crybabies were just handed a gift by the soft-spined head of the Fed. He blinked when he should have stayed firm on rates. Wall Streeters whined and whined. They cried foul over a system that they were daring to turn against them. And they got exactly what they did not deserve - a reprieve. It’s a scarier world than it was last week. It’s not just the Wall Streeters daring the system to turn against them, it’s also Big Bad Ben. The guy who is supposed to protect us from inflation and unemployment gone wild has just saved foolish investors from the so-called ravages of a mild correction. Except next time the correction will be much bigger and much harder to stop. The Fed chairmen said he lowered rates a half a point to save the economy. Thanks, Ben. I had no idea that the economy was that bad off in the first place. I guess now we can expect housing to be headed for a quick recovery, consumer spending to revive, and more jobs to be generated by the boatload, right? Does anybody actually believe that?! The economy’s weaknesses haven’t been eased one bit. There are only three things can really stop an economy in its tracks - runaway inflation, rising unemployment, and consumer spending drying up. Last week, these were all threats. Today, thanks to the Fed, they’ve become virtual certainties. Your dollar will lose value. More jobs will disappear. And you will be heading into the Christmas season with a dulled urge to spend. What the heck was the Fed thinking? Good Investing, AMG P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it Source : Excerpted from Investors Daily Edge
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