Currencies, Inflation, Profits!
Research for Online Investors

by John Dalt

3/17/09

Reuters reported that foreigners were net sellers of U.S. Securities in January. I wonder who will buy our treasuries, when foreigners pull away from the market.

Interest rates on U.S. Treasuries have to rise, but that is like saying, “it has to rain someday.”  The market can stay irrational longer than you can stay solvent.  Wait for the move in rates to begin before jumping on this bandwagon.  We have the heavy hand of the FED on the scale buying treasuries, holding down rates.  They are doing this to provide low interest rates to buyers of real estate.  When the economy begins to recover, and it will, interest rates have to rise.  Bernanke has stated, repeatedly, that they will take away the punch bowl to prevent inflation.  If they are out of the business of ‘quantitative easing’ then the Fed will not have any money to buy treasuries. 

Can the Fed avoid inflation?   That is like asking me if I can quite eating.   No!    When they pull money back from banks, interest rates will rise.   Inflation is already baked into the economy; we must wait for it to reveal itself. 

Switzerland devalued their currency last week.  This may be the beginning of countries trying to stay one-step ahead of their neighbors.  A devalued currency makes your exports cheaper, thereby juicing your economy.  Switzerland decided the best way to increase exports and thereby reduce unemployment was to gain a little advantage.  It is an old game; the U.S. has long accused China of manipulating the value of their currency in order to increase exports.  In a world of trade laws, World Trade Organization (WTO), and World courts countries have their hands tied when it comes to extending help to national industries. A cheaper currency raises all boats. 

The question that is not asked.   On March 11, I wrote, “It seems certain that much of this money was a backdoor bailout of Goldman Sachs and Merrill Lynch.  The real question, that is unspoken, how much taxpayer money was paid overseas?” 

Well it looks like Goldman got $12.9 billion and at least $27 billion to banks from France, Germany, and Britain.    No disclosure yet on countries.   The disclosure of bonuses being paid, some to people that do not even work there anymore, has taken over the front page.   The question still looms, and it will cause outrage, when the American public finds out money went directly to sovereign governments received AIG funds.   The conspiracy theorist in me wonders if the bonus outrage is conveniently covering up the bigger firestorm.

This month Galt’s SwingTrader has closed three trades for an average profit of 10% each, we have five more that should close this week with similar results. Do you want to make 8 to 10 trades a month averaging 10% each? That is what we do! I have redone our methods, we are “locking” in profits, and it is like seeing the dealer’s hole card. Learn more here .

We are pushing higher into resistance.  I hope you have cashed out of some positions and taken your profits.  This may go on, but tighten up your stops to lock in gains.  Volume was very light today, until the last hour.  Buyers are scared, and stock owners are acting like they are in a game of musical chairs, listening to the music for the first hint of the end of the song!

What does tomorrow hold, FEAR and GREED.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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