Looking in the Wrong Place
Research for Online Investors

by John Dalt

10/27/09

China, Russia, France, and Japan are all working to dethrone the U.S. dollar as the ‘world’s reserve currency’. We have covered this as a news story over the last nine months as the drumbeat and news hit the headlines.

OPEC has joined the group to unseat the dollar.We reported on Oct. 6, "Dollar Demise, Will We Answer?"  OPEC leaked information of pursuing a non-U.S. dollar basket of currencies, to replace the current U.S. dollar-traded market. It does not take a leap to think the predominant currency will be the Chinese yuan. China is traveling the world to lock up supply and increase oil imports as the U.S. and other western countries are buying in on ‘global warming’ and expect to reduce energy use.

Japan has a new government that was elected on a platform of distancing themselves from the U.S.  It should come as no surprise when the new Prime Minister Yukio Hatoyama said, “until now we have been too reliant on the United States…I would like to develop policies that focus more on Asia.”  This comment came after a trilateral meeting between Japan, China, and S. Korea.

Gold’s rise in the last nine weeks dovetails with news concerning the dollar.  While we were watching inflation to drive precious metals, threats to the dollar may have been the trigger that fired the starting gun.

What do we do now?  Gold (GLD), silver (SLV), platinum (PTM), and miners (GDX) are all off their highs.  I think there is more downside to come.  Watch the U.S. Dollar etf (UUP), as a general rule precious metals go up when the U.S. dollar goes down.  This relationship also works with crude oil, or any other commodity that is traded worldwide across currencies.  It does not work with natural gas (UNG), as gas is not easily transported so must be looked at as a local market.

Think of a tetter totter.

We could be in the middle of a huge bubble in precious metals, watch for panic selling that could take gold under $900  We will watch it and pass along our observations.  We will w atch support to catch them, let them consolidate, and then get onboard for the next ride.  Alternatively, if I may brag, subscribe to SwingTrader and let us take the work out of your trading.  Just enter your orders before you leave for work in the morning.

I must admit, we have had a tough month.  We missed the big run in silver; we were knocked out on our stop-loss.  On Sept. 2 we stopped out, the big run started from the moment our stop triggered.  I could not have called it better, or more wrong, if I had read the paper.  We protected a 6.25% gain, but missed another 33% gain in the next two weeks.

I am not complaining, and neither has one of our subscribers.  I only relate this experience to let you know, everyone misses trades.  Everyday there are a handful of stocks that take off, surprising the market with big gains.  Looking back it is always easy to ‘see’ the information that foretold the big run up.  Seeing it, and acting on it can challenge anyone.

Subscriber D.F. wrote asked if we were going to start an option trading service.  We responded perhaps, but not until next year as we are busy with Buy, Sell, Hold our newest offering.

I read your letter daily, thanks for the "personal touch", by replying.  Let’s all make a lot of money, and have fun doing it!

Our goals dovetail nicely!

Subscriber G.C. followed up our article Hin Sing, Hang Sung.  We linked to an excellent article titled, "When the Cat's Away, the Mice kill each Other."  If you missed it...

Thank you for sending me the article. It was wrenching to read, but it's always better to be informed. It's even worse than I thought. It's rather ironic, just the other day my husband said that if we continue down the road we are following, this great nation will end up a 3rd world country.  I find it amazing how much one learns about the world when learning to trade.

As you may have read before, I have apologized to our daughters. They are not inheriting the country my parents bequeathed my generation.

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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