The Doomed U.S. Dollar
Wednesday, October 31st, 2007
By Michael Lombardi, MBA for Profit Confidential
Inflation in the European Economic Community (EEC) hit 2.6% in October, up sharply to the highest level in two years. The EEC is comprised of the 13 countries that share the euro as their common currency.
With the European Central Bank (ECB) having a stated goal of annual inflation below two percent, the sudden jump in inflation in Europe will likely keep interest rates in Europe unchanged to higher. A recent report pegging the ECC unemployment rate at 7.3% (the lowest rate in about two decades) diminishes the chances of interest rate cuts by the ECB.
Is it any wonder the euro is up 14% this year against the U.S. dollar? Expect the trend of a lower U.S. dollar and higher euro to continue. With interest rates staying pat in Europe and the property market bust in the U.S. forcing the Fed to lower rates in the U.S., the U.S. dollar is doomed for now.
If there ever was a trade American investors could make for profit…where the writing was clearly on the wall…this has been the trade for past three years: Make money by investing outside the U.S. in non-U.S. dollars. I’ve preached the benefits of this opportunity for years, and I continue to see it as a great opportunity.
The U.S. dollar is “doomed” for now, for better or for worse, and it might just be for better for the U.S. Huge deficits, a possible home-grown recession and a crashing real estate market places immense pressure on the Fed to lower interest rates in the U.S.
And when U.S. interest rates are going down while the majority of other world central banks have raised their interest rates and are keeping them high, a declining U.S. dollar is a natural outcome.
NEWSFLASH — The largest mortgage lender in the U.S., Countrywide Financial, reports a loss of $1.2 billion for its just-completed third quarter. Expect losses from American mortgage companies and new-home builders to continue well into 2008. By the time the bust is over, we will see a couple of major bankruptcies from companies related to home construction.
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Tags: euro, interest rates, U.S. dollar
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
