Watching the Fed
Research for Online Investors

by John Dalt

11/3/10

The day after mid-term elections brings a wealth of economic news to bear on the market.  The U.S. Fed is working to kill the dollar.  Australia, India and China are working to strengthen the value of their currencies.

President Obama is going to Asia for the G-20 meeting and Asia Pacific Economic Cooperation (APEC) Summit later this week.  His stated purpose is to increase trade.  The U.S. wants other countries to increase demand in their economies for our exports.

It appears the president will get part of what he wants.  If the dollar gets cheaper, and other countries bump the value of their currencies, U.S. exports will benefit from currency valuations.

The danger is the U.S. will not export the inflation we are creating with devaluing the dollar.  Other countries strengthening their currencies are putting up a firewall.  Australia’s natural resources will get more expensive in the U.S. and China (as long as China ties the Yuan to the dollar).  China’s do-dads will get more expensive at Walmart and Target.  India’s tech products and services will become more expensive in the U.S.

It seems part of the world is calling the Fed’s bluff.  Treasury Sec. Turbo Tim Geithner worked to ward off a currency war two weeks ago at the meeting of G-20 Finance Ministers.  We reported this in our MarketToday article, The End Game.

At least three countries have demonstrated they are not going to enter a currency war with the U.S.  They are going the other direction with conviction.  Their currencies will increase in value and isolate their economies and citizens from inflation.

The Australian dollar reached its all time high against the U.S. dollar yesterday.  India’s stock market sold off after their central bank raised interest rates 0.25%.  Britain reports construction activity is slowing in the country.  South Korea’s foreign currency reserves hit a third record high in the last four months.

The Fed has announced their new efforts to pump money into the economy by forcing interest rates lower on fixed term investments.  We will have more on the Fed’s announcement tomorrow as our deadline does not allow time to go in depth, but Jim Rogers is correct.  “Geithner and Bernanke get it wrong every time.”

To the mailbag:
You would have made my day with a period (.) in the sentence to make it read “President Obama is leaving for Asia on Friday, he will not return.”---paid up subscriber T.D.

You need help.  You have gotten racially stupid.---subscriber H.H.

I don’t think reporting on our President’s trip, with 3,000 advisors, to his childhood home at a cost to the taxpayers over $100 million dollars has anything to do with race.  I guess he can ask the Chinese for a loan when he sees them.  I didn't write his book.

Editor’s note:  We visited with our favorite jeweler this week.  If you haven’t visited her website, you can always find it on our Investor Resources page, (it is our first link to other websites) or go to Gentare Jewelry

Gentare is one of the classiest friends of galtstock.  Where else can you buy affordable jewelry worn by Hollywood actresses and designed by our friend?

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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