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Declining Dollar ... What to do?

Discussion in 'Investing/Trading/Cryptocurrency/Altcoins' started by MJ DeMarco, Jul 28, 2007.

  1. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Anyone invest in currency ETF's such as the Rydex offerings? FTA, FTE, etc.

    The dollar is doing poorly worldwide and the options to take advantage of a declining dollar are buying into foreign currencies, foreign companies, or companies with foreign exposure (like McDonalds, Coke), etc.

    The ETF's give investors the opportunity to invest in the currency markets without having actual access to the currency market.

    Anyone use these? I haven't but am looking to move money into the Euro.
     
  2. kimberland
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    kimberland Bronze Contributor

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    Since I'm Cdn,
    I'm taking the opp to buy some U.S. companies.

    I prefer individual companies over ETF's
    because I like to have the security of other upside.

    So I'll buy U.S. companies that are undervalued in U.S. funds
    then add on the benefit of the exchange.

    Lessens the odds of a loss
    and provides the possibility of a double gain.
    Those are the odds I like.

    : )
     
  3. RaceDriver
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    RaceDriver New Contributor

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    An interesting question for those who trade in ForEx:

    What do you think the net impact would be if China decided to allow their currency to float vs. the dollar?

    I think it's clear that in today's world the dollar would fall relative to the renminbi, but where would the Euro come out in such an exchange?
     
  4. royemunson
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    royemunson Contributor Read Millionaire Fastlane FASTLANE INSIDER

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    It took me a long time to understand currencies and foreign markets in the grand scheme of things.

    They do move, but can be well traded if you focus on technicals and try to stay away from the news (just something I've learned from other traders).

    Currencies have been a big seller on the internet lately and how to trade them. As long as your system and money mgmt skills are strong, you can make some lute!

    Joe
     
  5. imirza
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    imirza Contributor

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    Had FXE for over a year. 10% + return.

    Check the Icelandic Krona CDs. 12% annual return and the currency is appreciating vs US Dollar. High yielding currencies generally go higher.
    Go to www.everbank.com to invest in foreign currencies and CDs.
     
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  6. Jason_MI
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    Jason_MI New Contributor

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    I'd like to see this discussion continue. I've read Dick's book on "Forex Made Easy", and quite frankly, I didn't find it easy at all. The concept is still escaping me. Any good web resources I can look at so we can talk about this?

    Anyhow, I've been investing, for a while, in both Asian companies (China), and in gold, and am doing pretty well at that (38% up). I'd really LOVE to talk more about Forex, though.
     
  7. kidgas
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    kidgas Contributor

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    I have elected to protect myself from the falling dollar by focusing on real assets and companies that benefit from those assets. Examples would be metals, energy, shipping, etc. Of course owning other currencies in the form of ETF's would help protect capital, but would you gain anything? If the dollar declines by 10% against the Euro, the ETF is up 10% but you lost 10% in purchasing power. Or, am I missing something? Please feel free to comment.
     
  8. imirza
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    imirza Contributor

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    If the Dollar declined 10% and your postion in the Euro ETF FXE increased 10% then, you are even in real terms . If you held your money in Dollars or held any asset which failed to gain 10% , you are lost money in real terms. If you made 10% in the stock market and the Dollar lost 10% did you really make money ?
     
  9. TheBoyPlunger
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    TheBoyPlunger New Contributor

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    It depends on how long the metldown occurs. Is it over, 1 more month, 1 year........

    Though I see a lot of currencies weakening against the $, IMO, this is a good time to switch from the $ if you need to.

    Again this could be cyclical - there will be a time to switch back to the $.

    But in some currencies, again IMO, the trend is irreversible for a longer period of time.

    The Yen was at 200 to $ around early 1987 and hasn't reached these levels since then inspite of the weakness in Japanese markets.
     
  10. TheBoyPlunger
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    TheBoyPlunger New Contributor

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    Also take a look at the Big Mac Index. If you go by it, a majority of the Asian currencies are undervalued.

    :smx7:
     
  11. Rawr
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    Rawr Gold Contributor Speedway Pass

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    I've played around with forex a bit and now trade stocks. Stocks are IMO much easier and less risky to lose your a$$. When it comes to forex, it is very hard to predict what will happen - and unless you spent a looong time studying fundamentals, you have no choice but to go by news.. which short of disasters doesn't always influence trading the way you expected.

    My .02
     
  12. randallg99
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    randallg99 Bronze Contributor

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    US$ just broke 80... free falling without a leg holding it and this decline would not have accelarated so fast had it not been for debt crisis....

    another thing... people are confusing subprime mortgage blow up with all mortgages... all mortgage pools are in jeopardy of defaults, not just subprimes.

    Anyway, what to do...

    CASH IS KING!!! my port is about 75% as of last week... many junior gold miners that are virtually impossible to unload in this environment without creating more frenzy along with Golden Ocean Freight.
     
  13. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    The dollar keeps dropping, approaching new lows again today.
     
  14. randallg99
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    randallg99 Bronze Contributor

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    I saw this message on my email (great feature, btw) ... watching the euro, loonie and yen move so fast is making my head spin... and have not seen any discussion regarding the correlation between the US$ and oil/gas pricing and now more closely related, the current credit crunch...

    so let me retrace and then give you my thoughts . first, I am absolutely not an expert... but gather my info from a lot of reading along with my first hand experiences working with imported merchandise with its freight in conjunction with my personal investments in real estate, banks and holding paper... all of the above gives me a rounded perspective on the macro markets or so I like to think ...

    a few years back, when oil and gas pricing was low in US$ terms and there was speculation that oil and gas pricing was going to rise because pricing in the US for these commodities lagged world pricing and despite what the conspiracy-tin foil hat wearing folks scream that the US govt has control over pricing. As much as we want to believe that the big brother has that kind of control, the free markets ultimately determine pricing.... (this point is not for discussion)

    oil and gas pricing remained relatively low and from our personal experiences and charts prove, the pricing for o&g jumped out of its skin and has moved in a direction unseen before in the America. When the 1970s embargo practically nailed this country to a wall, there was a physical shortage which is a different reason than the price jump experienced in last 2 years... recently, the pricing jump did not put the economy into a recession as it did in the 1970s and the difference is that the consumer did not have the leverage (or credit) they have today

    in the 2000s, there was absolutely no shortage during run up in price. Refineries, storage, logistics, drilling and the rest of the infrastructure involving o&g has remained robustly reinvested, growing and financially strong. again, there are pundits disputing this very fact, but generally speaking, there was more money reinvested into the o&g markets than ever before. As proof, dozens, if not hundreds of junior drilling companies sprouted up before the pricing jumped....

    a lot of the pricing was related to geopolitical arena. removing saddam from power created more hostility among many oil producing nations who have aligned with their Islamic ties as their political platform ... which ironically may have been the only similarity, btw... along with Irans nutter leader threatening stability, Venezuelas Chavez who preaches against America, with the constant kidnapping and blowing up pipelines in Nigeria... the list goes on, but these were some of the most headline grabbing in past 3 years... common theme is most o&g is in hands of rogue leaders loaded with corruption. Even Russias Putin basically kidnapped and jailed without due process the owner of Russias largest oil company, Yukos and has nationalized the company... thats like Bush kidnapping CEO of Exxon/Mobil and then putting the Condi or Dick or the West Wing in charge of the company...

    realistically, part of the price jump was due to several well and field shut ins that halted production because of hurricanes and other weather factors. Looking back at data, even their after effects were merely blinks and did not justify the sudden and extreme market jumps

    side note - So why does the US o&g private industry compete with world govt? no other country has the resources that the private industry in USA had/has... so the Ex/mobil, Chevron, Texaco, etc are all competing against world governments for bidding on equipment, fields, etc... China is sucking the market dry for logistic equip, drillers, etc and ultimately driving costs up.

    back on track- the oil markets were historically traded with uS$, but that has shifted to other currencies... yen and euro are now more exposed thus losing any demand for US$ in the process

    this results in nothing more than a $ diminishing purchasing power for products, oil, gas whatever... to describe this better and in more real terms - on world markets, the values have remained the same in their respective currency but it takes more US$ to buy that same product.

    now that the consumer has to pay more for gas/cars, oil/heat, and just about any other product made by man, the consumer who is earning the same wages has to absorb the extra expenditure of home products, energy and food while contending with a weakening dollar... all of a sudden, Chinese products are more expensive (for several reasons- freight, shipping, even labor costs in Ch are more) due to weaking dollar...

    so, now... more people are spending money on energy and other costs related to jumps in energy. where did the money come from when their wages were the same? Visa, MC, etc... savings rate during this period fell into negative territory and first time in economic history, Americans spent more than they saved... less world demand for the US$ is a lot more closely correlated whether or not American consumers have ability to continue at this pace. My guess is the world markets see this as a breaking point.... this directly affects how the consumer can continue affording the oversized mortgages while absorbing the costs of credit card interest and higher prices all across the board in every single category.

    I hope I didnt jump around so much...this is a highly technical subject and probably requires an intense powerpoint presentation to properly and completely convey... if there is clarity needed on my part, just send message.

    another time we can discuss reality of the potential gasoline inventory shortage on the horizon... if this trend continues, the shit will have already hit the fan...
     
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  15. randallg99
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    randallg99 Bronze Contributor

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    Canadian loonie hitting 33 year highs against US$ and normally would suggest buying more C equities at this juncture, but holding tight from any buying foreign equities now with potential rate cut on the horizon, which could spell a large rally in the US$....

    My opinion now is to diversify into natural gas. Historic 6:1 pricing ratio level of oil/gas has been violated for a long time showing the natural gas is grossly undervalued. Again, my opinion only.
     
  16. randallg99
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    randallg99 Bronze Contributor

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    I cannot believe BB cut the rate... the dollar is declining and starting to break records with a bunch of currencies with more to come.... value of dollar and inflation are not the Feds priority anymore apparently. All currencies pegged to US$ virtually all but dead.

    I think the USA just went on sale today and the world is going to eat it alive. Most Americans do not understand ramifications of a declining dollar not supported by the Fed.

    so, lets answer this thread`s question started by MJ-

    first of all, never fight the Fed.... and then go long big time commodities and foreign equities. I am still extrememly bullish on Canadian loonie and energy companies from the great white north. Commodities, gold, drillers, o&g, shippers are all on my birthday list...

    good luck
     
  17. piranha526
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    piranha526 Contributor

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    I agree that it was a big mistake to cut the rate today. However, realize one thing that benefits the dollar decline: our debt as a nation. The lower the dollar, the less we owe. It’s not the ideal way to look at things but it is something that has been written about for years in leading financial publications. Some have been saying (since the turn of the century) that the governments doesn’t care if the dollar slides because it will wipe out large portions of our debt.
     
  18. randallg99
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    randallg99 Bronze Contributor

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    Absolutely correct... the Fed now has aligned its best interest with politics instead of true fiscal and monetary policy.

    this rate cut has panic written all over it... any buying at this juncture should be done so with caution. Every message board, blog, every bobble head on CNBC that is yelling buy is leaving me cautious, still optimistic, but cautious.... there is a fundamental reason that gold is rising...

    and unless this debt is paid off, the dollar will have to come back at one point and the debt will again be realized... and while we are also in the midst of a heavy spending budget due to a stretched military, we have no choice but to continue increasing debt.

    but... importantly, what are you doing in the markets now?
     
  19. randallg99
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    randallg99 Bronze Contributor

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    we are all but screwed and the average American consumer wont have a clue until the PS2 or Benz jump up 30% just because the dollar is becoming worthless...



    Fears of dollar collapse as Saudis take fright
    By Ambrose Evans-Pritchard, International Business Editor
    Last Updated: 12:18am BST 20/09/2007



    Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.

    This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.

    "Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said.

    The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg.

    As a close ally of the US, Riyadh has so far tried to stick to the peg, but the link is now destabilising its own economy.

    advertisementThe Fed's dramatic half point cut to 4.75pc yesterday has already caused a plunge in the world dollar index to a fifteen year low, touching with weakest level ever against the mighty euro at just under $1.40.

    There is now a growing danger that global investors will start to shun the US bond markets. The latest US government data on foreign holdings released this week show a collapse in purchases of US bonds from $97bn to just $19bn in July, with outright net sales of US Treasuries.

    The danger is that this could now accelerate as the yield gap between the United States and the rest of the world narrows rapidly, leaving America starved of foreign capital flows needed to cover its current account deficit -- expected to reach $850bn this year, or 6.5pc of GDP.

    Mr Redeker said foreign investors have been gradually pulling out of the long-term US debt markets, leaving the dollar dependent on short-term funding. Foreigners have funded 25pc to 30pc of America's credit and short-term paper markets over the last two years.

    "They were willing to provide the money when rates were paying nicely, but why bear the risk in these dramatically changed circumstances? We think that a fall in dollar to $1.50 against the euro is not out of the question at all by the first quarter of 2008," he said.

    "This is nothing like the situation in 1998 when the crisis was in Asia, but the US was booming. This time the US itself is the problem," he said.

    Mr Redeker said the biggest danger for the dollar is that falling US rates will at some point trigger a reversal yen "carry trade", causing massive flows from the US back to Japan.

    Jim Rogers, the commodity king and former partner of George Soros, said the Federal Reserve was playing with fire by cutting rates so aggressively at a time when the dollar was already under pressure.

    The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, the driving the property market into even deeper crisis.

    "If Ben Bernanke starts running those printing presses even faster than he's already doing, we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems," he said.

    The Federal Reserve, however, clearly calculates the risk of a sudden downturn is now so great that the it outweighs dangers of a dollar slide.

    Former Fed chief Alan Greenspan said this week that house prices may fall by "double digits" as the subprime crisis bites harder, prompting households to cut back sharply on spending.

    For Saudi Arabia, the dollar peg has clearly become a liability. Inflation has risen to 4pc and the M3 broad money supply is surging at 22pc.

    The pressures are even worse in other parts of the Gulf. The United Arab Emirates now faces inflation of 9.3pc, a 20-year high. In Qatar it has reached 13pc.

    Kuwait became the first of the oil sheikhdoms to break its dollar peg in May, a move that has begun to rein in rampant money supply growth.
     
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  20. piranha526
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    Randallg,
    This author is a flip-floper and has no credibility (with me) after I read both of his articles. Read what he wrote in July 2007.
    http://blogs.telegraph.co.uk/business/ambrosevanspritchard/july07/willtheusdollarcollapse.htm

    This guy has a serious case of “emotional-BSâ€. He thinks, acts and writes based on emotion, not intelligence.

    Here is how he starts his July article:
    “Disregard all hysteria. The ailing Greenback will not collapse this year, not in ten years, not in twenty years, not in half a century. There is no credible currency against which it can collapse. (Unless you count gold). None of the world's rival power blocs have the economic and demographic depth to challenge American dominance.â€

    This is exactly why the market is not random! :smx4:
     
  21. Poudda
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    Poudda New Contributor

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    Here's the doom and gloom website that I visit quite often to get the bigger economic picture. Generally they advise buy Gold, other precious metals, Oil & Gas, Purchase Yen ETFs (due to the huge trading partnership with China, and a whole list of other reasons - not talking about the Yen Carry Trade; that's going to be eliminated if Japan raises it's rates. Increasing rates will also make the Yen take off like a rocket, and they may have to - although I forget why - I think my brain is leaking).

    http://www.marketoracle.co.uk/

    Most of the posts there try to get you to sign up for the author's personal blog for $$, but I'm not sure it's necessary since there's a weath of info to sift through.

    Oh. Our Loonie was at par with the Greenback at some point today, fell back a bit, but it will get there and stay there. Hasn't been that high since 77. I'm not sure I'd advise investing in the Great White North (long term) since our manufacturers & exporters are going to have some serious FX problems selling product to the US.

    Also, if you don't know already, the US has printed over a trillion dollars in paper over the past year. If you remember your history, Germany irresponsibly printed loads of money after one of the great wars and people were using wheelbarrels to dump their money in, and racing to the grocery store to purchase everything they could because the value was dropping by the minute.

    It's going to get very interesting in the next year or two.
     
  22. TheBoyPlunger
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    TheBoyPlunger New Contributor

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    IMO, the FED is doing the right thing. Looks like the fed's stance is - if you guys are not going to revalue your currency, we will devalue ours :bartmoon:
     
  23. randallg99
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    randallg99 Bronze Contributor

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    I posted below an article about someone who I respect, Rogers. Along with George Soros, his mentor, they made the fast lane overnight based upon a conviction that was so contrarian against mainstream that when they hit the motherlode shorting the British Pound, they were quoted as humbly stating (paraphrasing here) that `it was obvious`

    Rogers has been making a lot of bets in the past couple of years in commodities, agriculturals and currencies. and this is the latest...

    so, relevant to original question posed by this thread... shifting to the Yuan is a good hedge to the US$... for reasons many of us have expressed on this board.... is it that `obvious` again?

    Jim Rogers Shifts Assets Out of Dollar to Buy Chinese Currency

    By Marcel van de Hoef and Danielle Rossingh
    Oct. 24 (Bloomberg) -- Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency.

    ``I'm in the process of -- I hope in the next few months -- getting all of my assets out of U.S. dollars,'' said Rogers, 65, who correctly predicted the commodities rally in 1999. ``I'm that pessimistic about what's happening in the U.S.''

    Rogers, delivering a presentation late yesterday at an investors' meeting organized by ABN Amro Markets in Amsterdam, said he expects the Chinese currency to quadruple in the next decade and that he is holding on to commodities such as platinum, gold, silver and palladium.

    The dollar has dropped against all the 16 most actively traded currencies except the Mexican peso this year as slowing growth and the first interest-rate reduction since 2003 last month dimmed the allure of dollar-denominated assets.

    Since the Fed lowered U.S. interest rates on Sept. 18, the first cut in four years, the dollar has fallen 2.8 percent against the euro and touched a record low yesterday. Gold rose to a 27-year high and platinum jumped to a record.

    ``It's the official policy of the central bank and the U.S. to debase the currency,'' said Rogers, a former partner of George Soros.

    ``The U.S. dollar is and has been the world's reserve currency, the world's medium of exchange,'' he said. ``That's in the process of changing. The pound sterling, which used to be the world's reserve currency, lost 80 percent of its value, top to bottom, as it went through the whole period of losing its status as the world's reserve currency.''

    China

    The Chinese currency, known as the renminbi, or yuan, is ``the best currency to buy right now,'' Rogers said. ``I don't see how one can really lose on the renminbi in the next decade or so. It's gotta go. It's gotta triple. It's gotta quadruple.''

    China, growing faster than any other major economy, is ``going to be the most important country in the 21st century,'' he said. China's gross domestic product expanded 11.9 percent in the second quarter, and analysts surveyed by Bloomberg estimate the economy grew by 11.5 percent in the three months to Sept. 30.

    Rogers also is buying Swiss francs and Japanese yen, which he said have been ``pounded down'' because of the so-called carry trades.

    Unwinding Carry Trades

    In the carry trade, investors borrow in countries with low interest rates, such as Japan, and invest the proceeds where rates are higher. Japan's benchmark overnight lending rate is 0.5 percent, compared with 6.5 percent in Australia and 8.25 percent in New Zealand.

    The carry trades in yen and francs will ``unwind someday,'' which will send the currencies ``straight up,'' Rogers said. ``I'm buying the yen.''

    The bull markets in bonds and stocks are ``over,'' he said. ``Bonds will be a terrible place to be for many years and will in fact be going down for many years.''

    Rogers said he remains bullish on commodities because ``that's where the big fortunes are going to be made in the world in the next five, or 10 or 15 years. The current bull market is going to last until sometime between 2014 and 2022.''

    Commodity prices have surged as demand for raw materials, especially from China, rose faster than producers were able to increase output. Agricultural prices have led recent gains, including a record high for wheat last month and a three-year high in soybeans.

    ``The number of hectares devoted to wheat farming has been declining for 30 years, the inventory levels of food are at the lowest level since 1972,'' Rogers said. ``Suppose we start having droughts again. God knows how high the price of agriculture is going to go, so that's where I'm putting more of my money now than in other things.''

    He added, ``I think I'm going to make more money in agriculture than I make in precious metals.''

    Platinum, gold, silver and palladium will ``be much, much higher during the course of the bull market,'' he said.

    To contact the reporters on this story: Marcel van de Hoef in Amsterdam at mvandehoef@bloomberg.net ; Danielle Rossingh in London at drossingh@bloomberg.net .
     
  24. randallg99
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    randallg99 Bronze Contributor

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    this short term vision is the very reason the US$ is experiencing a significant downdraft...

    I wont argue with the Fed, but long term, these moves will detrimentally affect the American purchasing power for years, if not decades.
     
  25. china
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    china New Contributor

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    Los Angeles, CA
    Rep Bank:
    $57
    Now that gold has hit $800 and oil is approaching $100 a barrel, I'm see a lot of discussion of the dollar. Some of it is very scary, particularly since Citibank announced that emergency BOD meeting this weekend.

    Any thoughts on this? The USD isn't holding up well at all.
     

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