The devaluing US dollar means little to those who don’t plan on ever setting foot outside the US. With cheap labor still plentiful, prices for consumer goods will also remain reasonable. To the average American consumer, not much will look different on the surface. For the person who travels abroad, it’s a different story. A weak dollar means much, much higher prices.
Chasing Silver Bullets and Magic Buttons?
I have a time-sensitive message for you today, one that directly concerns you…
See, there’s a “dirty” little secret you may not know.
Are you guilty of frantically looking for the “one thing” that will finally work for you? A real “silver bullet”… a “magic button” that fills your bank account with cash… and lets you spend all day on the golf course or the beach?
Here’s how to make it for REAL:
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On the flipside, a weak dollar does stimulate the export sector as well. That will be beneficial to the markets and economy. The downside to this is that it also makes US assets cheap. The cheapest and most attractive US asset for foreigners these days is real estate. For foreigners, the advantage is two fold. First the US housing collapse has sent prices spiraling downward. Second, the weak dollar means an even larger discount. Form evidence I have gathered from real estate professionals, the two biggest foreign buyers of US real estate today are Canadians and the Chinese.
If you are looking to benefit from this trend, now might be as good a time as any to start nibbling in real estate. With a weak dollar and no perceived strengthening foreseeable, foreigners will begin to create a floor for real estate prices. Of course, location is what counts. The beaches of Miami are just as attractive to foreign buyers as they are to Americans. If you are thinking that this scenario sounds familiar, you are half right.
Back in the 80s when the Japanese market was going to the moon and the yen trading at highs versus the US dollar, the Japanese came en masse to buy US real estate, much like the Chinese are doing today. The difference is that real estate prices were soaring when the Japanese invested, and are plunging today when the Chinese are investing. Many Japanese companies went belly-up on bad real estate debts in places like California and Hawaii. Truth is, the Chinese will make out much better in the years ahead thanks to fortuitous timing.
The Riskiest Asset
Stocks are not the riskiest assets to own today. They may correct, sure, but there are still many companies that are trading at valuations that are quite attractive if you allow for a gradual recovery over the next few years. Solid businesses like Microsoft, Intel and Cisco are not going belly up anytime. In fact US companies are loaded to the gills with cash right now and they are using it for future growth through acquisitions. Companies like Hewlett Packard have been on a tear. HP has spent more than $20 billion dollars, most in cash in the past couple of years buying up technology companies. The same for Intel and Cisco. Last week Microsoft took advantage of the debt market to sell bonds yielding just 25 basis points above comparable Treasury securities. Borrowing money for 1% is a no brainer for a company that can make 15 times that from its ongoing operations.
The worst possible investment you could make today would be to buy US treasuries, especially long term bonds. With yields approaching 3% on the 30-year bond, you are locking yourself in for decades of misery. To date there is no argument that bonds have outperformed stocks. But if you are looking at the risk/reward ratio going forward, there is no argument that there is less reward potential from these levels from Treasuries, as most of the appreciation has already occurred. The only reasons to buy Treasuries today would be out of fear and if you believe that 3% over 30 years is a great return despite overwhelming evidence that monetary loosening does not cause inflation.
Optimism or Misguided Hope?
If there’s one thing a rising market does stir up, it’s hope for better times ahead. The S&P just closed out it’s best September in years with a rip-roaring move to the upside. The path of least resistance is higher…for now. The stronger market may bode well for incumbents in November, as the mood of the country seems to flip with the direction of the market.
While every cloud may have a silver lining, the current forecast for the US is not as clear. Government spending remains out of control, and that’s just for the stuff we know about. There are so many off-balance sheet unfounded mandates that we are unaware about that could magnify the deficit beyond anyone’s most pessimistic projections. Just one example is the unfunded liabilities for veteran’s health care. For vets coming home from the wars in Iraq and Afghanistan, the liability is projected to be more than $1.3 trillion dollars by 2020.
The US dollar is noticeably lower now than it was just a few months ago and the no-end-in-sight debt issues of the US are squarely to blame. Commodity prices are booming, still, with Gold topping $1,300 per ounce for the first time. If there was an easy fix, I would suggest it. But, short of a freeze on government spending and the inevitable cuts in entitlement spending for social security and Medicare, nothing much could make a dent in the growing liabilities the US is taking on.
The case for owning commodities and investing in commodity-based countries continues to strengthen. Sure, there are always ups and downs, but places like Australia and Canada are sporting stronger currencies for a reason – they have what the entire world is buying.
How to Profit from Government Spies
Good news: there IS a way to directly get back at the crooks in the establishment who smashed the dreams of generations.
This under the radar opportunity has even been government sanctioned?
Make no mistake, what I’d like to send you could easily be all you need to live a luxury retirement at the expense of the fat-cats who screwed you over:
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