U.S. Dollar headed South - Will it's economy follow?

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On January 13th I noted on this blog that I felt the usd was due for a dive and I pointed out that, because of this, and the fact we are better positioned to ride out the recession than our G20 partners (plus our abundance of commodities) I felt our Canadian Dollar was due for a sharp upward swing.

I also said I had then sold my usd cash into Canadian dollars and predicted it would go to .90 at least.

At that time, the cad was at .79 us and I am glad to report that yesterday it went over the .90 barrier.

That occurred much earlier than I anticipated and Now, to expand on that, I believe it will go to parity by the end of this year.

If you are sitting on u.s. cash holdings because you think it is safe, then think again.

The good ol usd is the most unsafe place to hold value. It is one of the main reasons for the stock rally of late. (and the fact major hedge funds are stocking up on Gold and other precious metals)

Now, if you believe, as I do, (and hedge fund managers obviously do) that a 1.7 $Trillion deficit this year, added directly to a 9 $Trillion national debt in the U.S.A., coupled with the unprecedented government ownership of major banking and industrial companies, will lead to a rapid rate of inflation in America, then you must ask yourself these two questions:

1. What will my Retirefund look like in 3 years time?

2. How can I protect what I still have?

Now, while I am in this pessimistic mood, let me put some more holes in the boat!

1. The U.S. has been suffering the loss of 500,000 to 650,000 jobs per month, for 8 months, with no respite.

2. The jobless rate will (according to U.S. Government numbers) exceed 10.3 percent this year. (and no one is willing to speculate where that number will top out).

3. 30% of home owners in the U.S. now owe more money on their home than it is worth>

4. War in Iraq, War in Afghanistan, and now Pakistan and North Korea are on the edge and the World Health Organization (WHO) is preparing for a possible mutation in the Swine Flu, that will manifest itself this fall.

5. Who will buy more U.S. Government debt, certainly not China, the largest holder of such debt who are now grumbling about the devaluation of those holdings.

6. And finally, What does America still make, that the rest of the world wants?

Ever heard of "Stagflation"?

Now lets sink the boat!

When the American Banking giants released their earnings this spring, and surprised everyone with what appears to be healthy earnings reports, did they include the $Trillions still on their books, of Derivatives ( referred to by pundits as "The toxic assets")
That answer is a resounding "NO"!

What are those assets? Lets draw a very simple analogy shall we?

I own a house in Phoenix, and I wanted to leverage that asset.

After giving me a new mortgage, my bank sold 10% shares in my house to a total of 33 different people and businesses. These shares are supposed to be "Derived" from the initial asset, the house! The Bank then convinces a major insurer to insure these derivative products, for a fee of course.

When hard times hit the owners of these pieces of paper, they try to cash them in at the bank.

Obviously, the bank can't pay 33 people each 10% of that Mortgage and they default to the insurer.

Do you know where the first large bailout payments went! Yes, your U.S. tax dollars!!

The money flowed through AIG, and into the pockets of Barclays Bank in London, and Deutche Bank in Germany.

Over $60 Billion each.

And that was just the first payment!

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I just joined Twitter....I think I am going to be hooked!

I joined Twitter today, and already I am getting hooked.

I am following investment guru's like Warren Buffett, Jim Cramer and others and I am receiving some golf lesson tweets which I sorely need.

I can see why this online phenomena has gotten to millions of followers.

I hope I can get some investment reading done outside of the "tweets".

Let me know if you indulge.

SiliconInvestor likes my favorite stock.....hmmmm

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I just ran across a recommendation by Greg Reid CFA, at Silicon Investor regarding one of my favorite stocks, Wi-Lan Technologies Inc.

Mr. Reid believes that this stock is greatly undervalued and has great upside potential due to it's strong patent portfolio.

In the interest of disclosure, In early March I increased our holdings 10 fold in this Ottawa based company this was before I read the evaluation at SiliconInvestor.com.) Wi-Lan now holds over 500 patents, the majority of which are in the wireless business.

During this time of uncertainty in the markets, I have solidified some mutual fund holdings into cash or money market funds, while hunting for what I believe are undervalued companies with great upside potential.

To this end I have also increased 10 fold, my investment in Ballard Power Systems as I believe the Obama Administration's push to green energy technology, coupled with the companies long history and strong patent portfolio in the area of fuel cell technology, will serve to help increase the value of these holdings over the next year.

Buying these stocks at what is essentially penny evaluations, reminded me of an old saying passed down to me.

"Look after the pennies and the dollars will look after themselves"!

I am betting these stocks will increase my Retirefund

What do you think?

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Derivatives are in for an overhaul.......It's About time!

President Obama announced yesterday that the Derivatives Market is about to undergo a major overhaul in that these exotic investments will become more transparent by hopefully being (for the most part) listed on Derivatives Exchanges

Since the big banks and Insurance Companies (such as AIG) have written most of these contracts, and since there are potentially $Trillions of dollars in assets that cannot be valued properly, and therefore cannot be cashed by the buyers, affecting the health of the entire global financial system, don't bet that the administration will have an easy time convincing these entities to list their contracts on open exchanges.

Though this transparency may be good for the overall economy, it may not be very good for some big players whose financial future may depend on keeping these contracts from the public eye.

However, if I don't miss my guess, the Obama administration will make these changes, or at least a strong oversight regimen, probably this year.

An Online Derivatives Exchange May be exactly what the doctor ordered, and overdue.

For more info on this subject check out the New York Times Editorial today.

Update June 4-09 New York Times

Update on the Obama Plan July 24th-09 at Breaking Views .

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Bull Market? Bear Market? the Jury's out....however

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In the past week, there has been a dizzying array of "experts" on CNBC calling this the start of a bull market, calling it a "Bear bounce" in a downward trend and everything in between.

It only goes to show that "no one" can time the market, and that includes the so called experts.

However, being somewhat of a pragmatist, IE: 37% gains in two months, wars in Iraq, Afghanistan, Sri Lanka etc, Pirates off the coast of Africa, a Flu Pandemic maybe only one or two mutations away (fall 2009) coupled with some old market staples such as "sell in May and go away", I have taken some off the table, and shored up the rest (I hope).

After all, I don't have to actually experience a house fire, to buy some basic insurance. I just hope everything doesn't burn. (sorry, pessimistic this week and nervous about my portfolio).

Then again, 35+% gains ain't bad for two years, let alone two months.

What do you think?

Will your RetireFund catch the flu.....

The World Health Organization is ramping up it's coverage of the H1N1 virus (swine flu)and is warning all countries to make their preparations for a worldwide pandemic.

The same organization has done studies regarding how a "pandemic" of the sort that stunned the world in 1918 with over 50 million deaths of mostly young adults, would affect the global marketplace.

The numbers are mind numbing! Their calculations say that it would cost the world economy over 3.1 $Trillion. Most people expect that, because of the recent reports of mild symptoms in most countries outside of Mexico, and virtually no deaths, that this will not be as bad as some might expect.

However, in every flu pandemic recorded, the disease started out with mild symptoms before the flu strain "mutated" into a more deadly version that the human body just wasn't ready for.

Is your family ready for such an outcome? Are your investments prepared for such an outcome? After you talk to your doctor and visit the WHO site, talk to your investment adviser. If they make light of your inquiry, switch advisers!

Your thoughts?

June 9 2009 Update article at New York Times.
June 11th update Flu Pandemic Alert