Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20
Global "Debt Mountain": Beware of This "New Peak" - 13th Nov 20
Overclocking Zen 3 Ryzen 5600x, 5800x, 5900x and 5950x to 4.7ghz All Cores Cinebench R20 Scores - 13th Nov 20
Is Silver Leading Bitcoin or is Bitcoin Leading Silver? - 13th Nov 20
How Elliott Waves Simplify Your Technical Analysis - 13th Nov 20
How to buy Bitcoins using debit/credit card? - 13th Nov 20
Will COVID Vaccine Kill Gold and Silver? - 12th Nov 20
Access to Critical Market Reports - 12th Nov 20
Stock Market Dow Futures Reach 30,000 on News of COVID-19 Vaccine Trials Success - 12th Nov 20
8 Terms & Conditions You Must Know Before Asking For Life Insurance Policy Quotes - 12th Nov 20
Gold Stocks Post 2020 US Election Outlook - 11th Nov 20
Champions’ League Group Stage Draw: All You Need To Know - 11th Nov 20
Stock Market Secular Trend - 11th Nov 20
Stock Market Correction Curtailed by US Election - 11th Nov 20
What Causes a Financial Bubble? - 11th Nov 20
Ryzen 9 5900X RTX 3080 - Scan.co.uk vs Overclockers.co.uk UK Custom PC System Builder Review - 10th Nov 20
Killing Driveway Weeds FAST with a Pressure Washer - Saving Block Paving from LOTS of WEEDs - 10th Nov 20
Trump Fired, Biden Hired, What Next?  - 10th Nov 20
Looking for a Personal Loan? Here Is What You Have To Know  - 10th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Growing Investor Discontent With U.S. Government Economic Solutions ...

Interest-Rates / International Bond Market Jan 29, 2010 - 11:52 AM GMT

By: Oakshire_Financial

Interest-Rates

Diamond Rated - Best Financial Markets Analysis ArticleNick Thomas writes: When scanning the various investment boards and forums on the Internet these days, it's obvious that most people have very low confidence both in the economy and the government's efforts to fix it.


"Smoke and mirrors" is a common theme directed at the officials who are either woefully ignorant or blatantly lying about the worth of their existing "solutions" to the problems they face. There's a deep underlying suspicion of mainstream media cheerleading. The perception of the informed public is that the government's numbers are about as reliable as quoting the tooth fairy.

Charts like this one aren't fooling anyone (I've helpfully added some extra text as to my opinion of the latest optimistic numbers)...

The reason this kind of projection has no real credibility is because things continue to go from bad to worse in the real world. Economic pain and suffering increases by the day and I haven't read anyone outside the establishment cheerleaders who thinks things are getting better.

U.S housing stats are weaker than expected. Nine banks have failed already this year. The government's only response is to add even more debt onto what we already owe and create ever more Byzantine regulations to apply band-aids over sucking chest wounds.

According to a poll conducted right after the Senate election in Massachusetts, a majority of people who voted for Obama in 2008 and voted for Republican Scott Brown last week believe that, "Democratic policies are doing more to help Wall Street than Main Street." Ouch

Where there's smoke there's fire. People are starting to get angry and there is a deep suspicion that any government effort to rein in the 'too big to fail' banks is just for show. The latest Washington pronouncement is that retail-level banks would be banned from playing the markets via hedge funds and other risky vehicles. The government also likes the idea of imposing a cap on the market share of any one firm.

Does anyone seriously believe that the banks – who just need to point a gun at the government's head and scream "We're too big to fail!" to get what they want – will actually get hurt by any of this?

Media Bait And Switch Tactics

It didn't escape my notice that one of the biggest media-hyped 'outrages' that got extended play last year were the tempests over executive bonuses. In the case of AIG and a few others, these amounted to several hundreds of millions and were widely condemned as unjust rewards for incompetence (or criminality – take your pick!) and for driving their companies right over a cliff. Yeah, the outrage was appropriate, but did you note that all this outrage peaked just as the Powers That Be were still handing out your cash by the hundreds of billions in the meantime?

It's just like a pickpocket distracting you with a ketchup spill on your shirt while his accomplice makes off with your wallet. Scream about millions while billions get looted from under your nose.

On the message boards, some folks are openly wondering if the country will survive what's feared to be the worst economic drought since the Great Depression. In fact, there's a growing consensus amongst sophisticated investors that investing in the US now seems dangerous due to the looming budget deficit and weak financial institutions who are being coddled by a government too scared to implement truly tough (but unpopular) reforms.

If that's so, where can you put your money? What is the safe bet?

What Else Is Out There?

The Euro-zone is having a few problems right now. The PIGS (Portugal, Ireland, Greece, and Spain) are mucking up the Euro trough at the moment. Greece managed to issue about $13 billion in debt at auction, with almost $75 billion -- about 20% of its national GDP -- more debt to go later this year. If Greece doesn't get its money, its government goes bust and the Euro-zone has to cope with the humiliation of a member country's debt default. Whoops!

That would certainly explain why the Euro has been dropping like an albatross over the last few weeks.

China, the supposed 'next great financial power', is stuck within a popping bubble of its own and is trying to curb excessive lending. Its overall 'growth' has been driven by the same inflationary madness employed by our own government over the last couple of decades.

Now – belatedly – it's trying to gracefully disengage from its aggressive stimulus plan. Communists playing the market manipulation game better than the (alleged) capitalists? Good luck with that...

Meanwhile the Japanese are still stuck in a never-ending economic malaise that seems as terminal as a smoker's hacking cough.

Canada is our largest trading partner which means their own economy is going to be inextricably linked to ours whether they like it or not (Canada's latest projected GDP numbers are very close to our own, if you were wondering).

In short, it seems like a whole lot of other governments out there are pulling the same tricks as our very own not-so-beloved federal institution. And they are not doing a whole lot better at it, at least at first glance.

Let's Start With Currencies...

So just how are their currencies doing, by way of comparison? Here's a look at the most interesting currencies as measured by currency trusts issued by CurrencyShares. Currency ETFs are essentially Trusts which can be bought and sold through a traditional brokerage account. They are listed on the NYSE Arca and trade in exactly the same way as an ordinary stock does.

The advantage of such products is that you don't have to have a forex or futures account to "invest" (or more correctly, speculate) on the future direction of a given foreign currency.

For the sake of a streamlined comparison, all of these are ETFs offered by investment entity CurrencyShares. This article is not an endorsement of the company. I'm merely using a single firm to iron out any possible differences in methodologies used by different companies. Here's the symbol list and the charts.

  • FXA  - Currency Shares Australian Dollar Trust
  • FXB  - Currency Shares British Pound Sterling Trust
  • FXC - Currency Shares Canadian Dollar Trust (green line, not labeled on the chart)
  • FXE - Currency Shares Euro Trust
  • FXY - Currency Shares Japanese Yen Trust


Over the course of the last 365 trading days, it's pretty clear that the Japanese Yen is the king of the hill. It's outperformed everything else even though it's stalled lately in the face of increasing U.S. Dollar strength. The downside of the Yen is that you earn next to no interest on it, as you can see from this Bloomberg government bond table.

I don't think 2.2% over 30 years is exactly an inspiring return on your money.

The next best contender is the Australian dollar. It's shown a lot more recent strength after recovering from a heart-stopping plunge nearly a year ago. This strength has no doubt been fueled by the attraction of a one-year return of 5.25% and a two year return of 5.75% on Aussie government bonds as shown here. (Note that the coupon rate peaks at 4 years rather than 15 years).

This is about the best option amongst stable First World-level government bonds (Greece pays 6.2% but do you really trust a new bond issue that will eventually equate to 20% of GDP?)

Now, I'm not telling you to rush out and buy Japanese yen and Australian dollars (or Australian government bonds), but now you have a pretty good idea of where to begin looking abroad for the most promising non-U.S. investment alternatives.

Next week I'm going to expand on this idea a bit more by examining some of the best performing stocks in each country (Japan and Australia) with the working theory that you'll get a double boost from a strong stock plus a strong currency working together in tandem.

I also plan to review different asset classes, which offer diversification away from investments which remain dependent upon U.S government actions.

As per my earlier columns, I still stand by my position that the U.S. dollar will continue to appreciate against gold and most other paper currencies too, but that this phenomenon won't last forever. Right now that premise is holding up well, so it's worth looking at other currencies we can jump to once the US dollar's run has peaked later this year.

Good Investing,

Nick Thomas,
Analyst, Oakshire Financial

Oakshire Financial originally formed as an underground investment club, Oakshire Financial is comprised of a wide variety of Wall Street professionals - from equity analysts to futures floor traders – all independent thinkers and all capital market veterans.

© 2010 Copyright Oakshire Financial - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Oakshire Financial Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules