Tim Geithner and Treasury Have Some Explaining to Do

Jun 27, 2011, 12:08 pm EDT

If you could ask one question to Treasury Secretary Timothy Geithner, or any other member of the U.S. Treasury Department, what would it be?

InvestorPlace.com wants to know – because thanks to a generous offer from the White House, I will be given access to top Treasury officials and will have the opportunity to ask a few questions. Any topic relating to the Treasury Department is fair game – the automaker bailouts, the debt ceiling, bond auctions and all things in between.

So if you want give the Treasury a piece of your mind, this is your chance. Read 

What $15 Draft Beer Has to Do With the Economy

Jun 22, 2011, 11:04 am EDT
What $15 Draft Beer Has to Do With the Economy

Who in the world would pay $15 for a draft beer? Well the question is more, where would one pay such an astronomical price and why? The who is me. The where is Paris. And the why is the destruction of the purchasing power of the U.S. dollar courtesy of the Fed and the profligate folk in Washington.

When the Fed artificially lowers interest rates (see zero Fed funds rate), investors and savers lose their appetite for dollar-denominated holdings. And when the Fed guns the money printing presses, creating an excess of banking liquidity, international investors tend to flee the dollar. As such, a one-two punch is delivered, sending the dollar down versus hard currencies, like the Swiss franc, and trading currencies, like the euro. The Great Money Flood

In France, a bistro bill is calculated in euros, and Americans must convert their dollars for euros. At an exchange rate of $1.44, an American is going to pay $14.40 for every 10 euros. That is quite a premium, is it not? I have come to think of a French draft Kronenbourg 1664 as a Bernanke beer. OK then, I am accusing the Fed of cheapening the dollar by depressing U.S. interest rates and flooding the American banking system with excess liquidity. You’ll know I am right when you see a pickup in the monetary base (high-powered money) and excess bank reserves. My charts indicate that these exact conditions exist. Read 

What the U.K. Can Teach Debt-Riddled Washington

Jun 22, 2011, 8:42 am EDT
What the U.K. Can Teach Debt-Riddled Washington

Last year, the U.K. took the first painful steps on the path of fiscal austerity that the U.S. has so far avoided.And the iShares MSCI United Kingdom ETF Fund (NYSE: EWU) has outperformed the major American stock market indices. The EWU U.K. ETF is up 20% in the last 12 months, compared to about 16% for the broader U.S. market.

Of course, The iShares United Kingdom ETF fund doesn’t tell the whole story. The 40 billion pound “unavoidable budget” of emergency tax increases, public sector job cuts and government spending cuts in Great Britain was incredibly unpopular with the public regardless of how the British ETF performed.

Some experts argue that Prime Minister David Cameron is trying to do too much too fast. The Conservative government, though, has its fans. Pimco fund manager  Saumil H. Parikh recently argued that the U.K.’s economic policy could be could be a model for the U.S. to follow.  Moody’s Investor Service recently reaffirmed the government’s AAA rating on its sovereign debt with the not surprising warning that it would be in danger if the government slacked off on its austerity policy. Read 

The Country That May be Able to Achieve Energy Independence

Jun 20, 2011, 11:19 am EDT

Could the United States ditch its dependence on foreign oil by 2020?

No way, not with the leadership we have, and the never-ending, me-first haggling of both major parties. Hubris, self interest, reelection posturing and financial self-interest all enter in. It is enough to make one sick.

If not America, where then? The answer is Sweden, which is one of a number of reasons I have been advising purchase of the Swedish krona through CurrencyShares Swedish Krona Trust (NYSE: FXS). I have taken a substantial position in this exchange-traded fund (ETF) myself, and will continue to add to my holdings. Read 

Is This the End of the 2009-2011 Bull Market?

Jun 14, 2011, 3:00 am EDT
Is This the End of the 2009-2011 Bull Market?

Last week, the Dow closed below 12,000 for the first time since March 18, after falling for six straight weeks. That hasn’t happened since the week ending Sept. 30, 2002, but that was at the tail-end of a 30-month bear market — a great historic buying opportunity.

Compared to the dismal days of 2002, the recent six-week decline has been small (-6.8%). Last year, the S&P fell much further (15.3%) from April 29 to July 1, but then it rose 33% in 10 months. In this latest sell-off, data from EPFR Global tells us that retail and institutional investors withdrew the most money from U.S. mutual funds of any week since August 2010. But selling stocks then, before the launch of QE2, was also a bad move! So what’s next? Global Growth Should Resume Once Japan Recovers

The global economy is still expanding, but at a slower pace. Investors are selling stocks because they are concerned about the U.S. economy after the Fed suddenly ends its second round of quantitative easing (QE2) this month. It’s hard for the market to recover when so many investors used Thursday’s rally as an excuse to run for the exits (and perhaps a long weekend in a cooler place) on Friday. This malaise could last another few weeks, until we see positive second-quarter earnings announcements come mid-July. Read 

10 Scary Financial Headlines You Don’t Need to Fear

Jun 13, 2011, 1:17 pm EDT

June has not been kind to investors. It began with what the press told us was the “largest one-day loss in over nine months,” with the Dow falling 279 points, or 2.2%, on June 1. What’s more, that decline locked in the fifth-straight negative week, something that the press told us hadn’t happened since the terrible market crisis of 2008.

The press is usually negative, but June has been a bad-news bonanza, so I’d like to go over 10 of the most negative headlines and turn them on their ear, statistically. Maybe by the end of this exercise, you will be able to smell the roses in your garden instead of dodging all those well-publicized nettles in the forest. The Positive Angle Behind 10 Scary Headlines

At the start of June, the Wall Street Journal’s headlines naturally focused on the negative news. The June 1 headline was “Housing Imperils Recovery,” while June 2 was “Economic Outlook Darkens.” In addition, the talking heads of CNBC counted down the “start of hurricane season” and “June’s dismal market history,” but these scare-mongers ignored any historical perspective that revealed a positive angle. Read 

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