Achtung! Germany wants its Gold back, Schnell!!

This week the German Central Bank (Bundesbank)  applied to repatriate its gold reserves from both the U.S. Federal Reserve Bank in New York and the French Central Bank in Paris.  (Think they know something we don't?)
Wonder if they trust their Central Bank counterparts.....hmmmm...

On another international note, Japan is doing whatever it takes to downgrade the Yen at this writing. (Yea another currency joins the race to the bottom)

 While you are contemplating that, here is an interesting Chart from Bloomberg detailing the price of gold in the year after U.S. Federal Elections.

  If you dont own gold, may be you should buy some now!
 ED

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Economies of U..S.A. and Canada on divergent paths!

According to the U.S. National Bureau of Economic Research, U.S. and Canadian job markets have struck a divergent path since December of 2007 when the recession in the USA began.  This chart explains how divergent those paths have been in graphic terms.

At this writing, Canada has reproduced all of it's recession job losses and, in fact, has increased that number by 2%.

When the Canadian dollar was trading at .77 cents I wrote an article that basically told you to "hold on to your loonies".  I reiteratted that sentiment over a year later when the loonie was trading at .97 cents to the usd again telling you to hold on to your loonies.  Now, even with the Cannuck buck trading at over $1.04 usd I am reiterrating that same sentiment. Hold on to your loonies!

In the 1950's the Cannuck buck traded around $1.08 to $1.10 to the usd.  I believe those levels will be reached again and will hold true for the forseeable future. There are many reasons for this opinion, not the least of which is the massive debt load of the U.S. and a number of it's states.  The U.S. bond market is in for a financial tsunami at some point beyond when quantitative easing ends, and maybe before that time.

The U.S. has been, for the past year, buying up to two thirds (2/3) of all of it's own debt on the bond market. As that giant Kenseyian experiment ends, listen carefully for the underwater earthquake that could eventually spawn a Tsunami called hyper inflation.

Markets usually like inflation. Commodities like inflation. Even housing likes inflation and remember, the U.S. Federal Reserve always errs on the side of inflation. The problem is, once this Genie is out of the bottle, no one really knows where it will go, but it does not bode well for the usd.

Since commodities love inflation, and Canada is a country rich in almost every single commoditiy from water, to wheat, grains, cattle, oil, gas, gold, silver, lithium, diamonds, gypsum, lumber, seafood, coal, etc. etc  look for the cad to strengthen, even from these levels.  As two billion more people from China to India, Brazil, Russia and Indonesia join the middle class, the demand for all commodities will climb, and climb and climb.

Anyone who thinks the commodities bull market is over will miss out on huge upside. This lull is a buying opportunity and when everyone gets extremely negative over the next month or so, it will be even a better buying opportunity.

Look for Canadian interest rates to remain above U.S. rates, to rise slowly and strengthen the Cannuck buck.

Now remember, "hold on to your loonies"!

Happy investing.

HP

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Canadian dollar - Hold on to your Loonies Canada!

The Canadian dollar went to parity last week for a short time before dropping back to the .99 cent U.S. range. It dropped another half cent later in the week to around .985 US.

This surge and short pull back can be easily explained in the context of the U.S. dollar. Essentially, it is dropping, like a stone, in the face of more quantitative easing (QE2) on the agenda of FED chairman Ben Bernake.

India and China are buying up Gold at a record rate. This will no doubt affect your retirefund.

Image via Wikipedia

This week, India purchased 200 metric tons of gold from the IMF (International Monetary Fund). It amounted to half of all the gold the IMF placed for sale. India bought it to bolster it's foreign reserves account. China is strongly expected to buy up the other half. What does that tell us about gold prices and the decreasing value of the U.S. Dollar. Well, it tells us a lot, and many Americans are not going to like the answer.

The United States dollar has been the worlds reserve currency for the past 50 years, even before the gold standard was dropped. That gold standard, or some form of it, is creeping back into the international psyche as governments and individual investors buy up gold and gold miners in record numbers. There is a very basic, common sense reason for this. The United States dollar is headed lower, maybe a lot lower. It has to. Here's why.

At the start of the George W. Bush administration, the U.S. economy was in the black. Bush was handed a "surplus", the first one in 30 years. During the next 8 years of his administration, the U.S. went into debt to the tune of $10 Trillion by the time Obama took office. In the midst of two wars being fought on two different fronts, W. did what no other U.S. president had ever done at such times of crisis. He cut taxes. Not only that, he did it twice. The result is the debt and deficits the United States have to this day and unless there is a sea change in spending and the tax regime, it will get a lot worse.

This year alone, the U.S. will add $2 Trillion more to their debt. If there are no changes, economists predict that by 2015, the United States will be $23 Trillion in debt. Even the powerful American economy can't take a hit like that. A devaluation in the dollar is probably one of the few ways the U.S. can pull itself out of this mess. In the mean time, other countries, and the citizens of other countries, looking for a better store of value, are turning to the one currency that has been in place for over 6,000 years. No fiat currency has ever replaced gold, although the USD tried very hard, becoming the reserve currency for the world and replacing the gold standard. That gold standard is creeping back, in some form, at this writing.

China has doubled it's gold reserves over the past few years. India just did the same and they both will no doubt continue to buy as their foreign exchange reserves shrink with the U.S. dollar. They want to hold value, not lose value! The Hong Kong government recently moved it's entire gold reserve to a domestic location from London where it was held. China is not only investing in gold, but it is telling it's citizens to do the same. India's citizens have long done this and are the biggest buyers of gold jewelry in the world.

As the U.S. dollar dives, it's stock market is gaining daily. After a recent pullback last week, the U.S. market is again going gang busters. It has to. As the dollar drops, people are investing in good companies as stores of value and their stocks are going up correspondingly, with the dollars demise.

Publicly traded Gold miners have a unique position in all of this. They are stocks and they produce pure gold, thereby gaining from both sides of this gold buying bull market.

Over 95 % of the worlds entire gold supply is now above ground. No wonder, after 6,000 years of mining. Canada, however, is one of the few countries with a number of producing gold mines.

Here are our top picks of these gold miners in order.

1. Apollo Gold Corp - U.S. company mining in Canada (APG-TSX or AGT-Amex)
2. Barrick Gold (ABX - TSX or NYSE)
3. Kinross Gold (KGC-NYSE)


If you don't already have gold in your portfolio, then I suggest you do so soon.

Previous articles:

1. An American Fox in Canada's gold hen house.
2. The argument for gold.

Other sources: Could Gold go to $5,000 per ounce?

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How can you profit from the U.S. dollar decline! A Simple Stragegy.

Image via Wikipedia

The United States dollar is going down! The U.S. Government will be over 13 $Trillion in the hole by the end of this year. Unless something drastic is done to reduce the slide, by 2015 it will be 23 $Trillion in the hole. This summer rally , (some green shoots aside) was predicated on the back of a sinking u.s. dollar . Many American investors are so busy getting angry and waiving the flag to prop up King Dollar , that they are blinded to one of the best investment plays this year and probably through 2010.

Smart Canadians are ignoring the whining from their own Governments and businesses about a high Canadian dollar being bad for exports and they are taking advantage of a situation that Ottawa doesn't want to acknowledge. The Canadian buck will outstrip the U.S. buck over the next year. So how can you play this for the betterment of your Retirefund?

Back in January, when the Canada buck was trading for around .77 cents U.S. I traded my u.s. dollars into Canadian dollars. I have gained about 20% with this simple strategy, however there is another good market strategy that I, and many others, are making some money with. Commodities such as oil, gold, natural gas, are denominated in U.S. dollars. If you bought some of these commodities, with your Canadian dollars, back in March, you have no doubt made good money.

Now, many Americans, whose pride (and pocketbooks) have taken a big hit during this dramatic downturn in their economy, are championing the return of King Dollar. Can't blame them. If your house is losing value, and your dollar is losing value, and the Gluttons of Wall Street have swallowed a good portion of your retirement funds, you are definitely in jam. However, average Americans are once again being led down the garden path into believing their dollar will go higher over the next few years. Feeding those false hopes, every time the dollar goes up a bit (as it did on Monday) the talking bull heads on CNBC (Kudlow, Kneale etc) waive the flag and declare the return of King dollar. I believe they couldn't be more wrong.

In fact, I am so convinced of this that, when I see a rise in the U.S. dollar, and a corresponding drop in our commodities market, I see it as a great buying opportunity for those commodities, especially if you are paying for your shares in Canadian dollars. As I have pointed out before, we have had the best balance sheet of the G20 for the past 8 years (We've been in the black until the crisis hit this year) Our banks have stayed conservative, avoiding the toxic Derivatives debacle and have entered this summer rally strong. We have the second largest deposits of oil and natural gas in the world, the largest deposits of potash, lumber, gypsum, seafood, nickel, uranium and arguably, diamonds. We own 20% of the worlds entire supply of fresh water, with only .03% of it's population. We own the largest claim to the arctic, which is suspected to harbor 25% of the total world's oil supply, and finally, the largest consumer on the planet, is right next door.

Don't get me wrong though. The Canadian dollar and commodities market is by no means the only place with good value these days. They will go sideways for the next month or so, but by the end of the year the Loonie will approach parity. The BRIC countries , or at least two of them, are good investments. (Except China for the rest of this year) The Australian dollar, who's commodities feed into the Chinese economic realm may also be a good bet. We have some excellent, small Canadian companies that are basically overlooked south of the border, until they dominate a market (RIM). They are essentially, under the radar, so to speak. Find them, research them thoroughly, ensure they have good management, good science and technology , and then don't be afraid to invest. You could hit the RIM of 2010-2011!

If you are American, you should be in the stock market right now. Having cash, or cash equivalents sitting on the sidelines for any length of time is a recipe for losses, period! Sadly, the gluttons of wall street are the ones who will actually benefit from the dollar crisis they have caused. Stock Markets go up as currency devalues. It is actually that simple.

The Canadian Government and Canadian manufacturing don't want a strong Canada buck, but they won't have any choice in the matter. It is time our manufacturing and export companies grow because of innovation instead of a weak currency. Those days are gone.

A Canadian buck with a 5-8% premium over the U.S. dollar (a la the 1950's and 60's), is a Loonie I can live with. All of our retirement funds, and our travel budgets, have gone up over 20% this year because of it. The Loonie now buys 20% more than it did 6 months ago. It will go higher still. Here is a quote from Warren Buffett from his "The Greenback Effect"!

"The world "properly" worries about greenhouse emissions causing global warming", says Buffett. "Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar's destiny lies with Congress."

Previous articles: U.S. Dollar dives - Pigs at the trough

Update - Aug 18th from Bloomberg .

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U.S. Dollar up this week, getting ready to dive lower, but there may be a silver lining!

Image via Wikipedia

The U.S. dollar seems to be strengthening this week, but, Don't be fooled. It is going to dive much lower over the next few years. That according to Dow Jones News Wire and even George Soros, who actually doesn't like any currency today. Soros says that:

"the usd is a weak currency, except for all the others"!

Now, how do we mortals interpret that statement? Soros went on to point out that China's currency would be an interesting story if they let it float on international currency markets, but they won't.

If you had almost two trillion dollars in international reserves like China does, and you wanted to try and keep that value in today's market, where would you try to store that value? In China's case, they seem very unhappy that the majority of their monetary reserves are in the usd. So, where do we put our two trillion?

Commodities, that's where! This spring there has been a rally in commodities. Now do you think that China's hoarding of commodities might have a little something to do with that run up? Soros certainly thinks so. I believe a fund manager who made over 1 Billion on the currency market just last year alone should know a thing or two about this subject. The Chinese obviously believe that they will hold more value in commodities than in the u.s. buck. I think they are right, but how can we mere mortals gain from this knowledge.

Back on June 16th, I mentioned in this blog, that a number of hedge fund managers have stocked up on gold as of late. They will probably sell it into a buying binge of scared investors during the next downturn in the markets. If you buy it then you will make them lots of money, and lose your own. There is, however, a silver lining. As I mentioned in that previous blog, I believe silver is undervalued . This week, it appears, Analysts from Dow Jones agree with me. They are calling for a short drop in the price of silver, possible to the $12.90 level, but then call for it to reach $15 over the next few months.

If you are nervous, and don't believe my "favorite company" tech recommendation ( Wilan Technologies ), then silver might be a good place to store some value in the short term, while you "wait and see" along with the other Trillions of dollars sitting on the sidelines.

That is, of course, if you are a U.S. citizen. If you are Canadian however, you might want to sit tight as silver, gold, and commodities are most affected by the decline in the u.s. dollar over time, and what does Canada have an abundance of? You guessed it! And the Canadian dollar will rise because of it, against the greenback.

Though the Canadian Government doesn't want parity, it's coming, and soon.

Predictions: ( I know I shouldn't make them)

End of year - U.S. dollar - Canadian dollar at par

End of year: Wilan $5-$7 share (Currently $ 1.49)

Oct 2009 - Silver $15 Gold $1,000

Update: Sept 10th

Wilan $2.22

Silver $16

Gold $1008

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