The Euro Bull: New Paradigm of FOREX

The Euro Bull: New Paradigm of FOREX. As the EUR / USD breaks 1.50, investors should take a look at the currency market. 100/barrel oil, $ 1000 gold, and $ 10/bushel wheat are not anomalies, nor is there a bull market in commodities. The U.S. dollar is losing its value and its relevance in the world reserve currency.

What determines the value of a dollar? The common perception is that purchasing power determines the value of money, which is partly correct, but it is not the whole story. In a world of floating currencies, money is also valued in relation to other money. Simply open a bank account in Europe, and have a% per annum interest, would have shown a US-based investors over a 50% yield of 5 years. There are some different ways of looking at it, but all leads to the same conclusion: the value of the dollar decreases. The other logical observation is that by not investing in Europe, an investor actually lose 50%. It is a difficult psychological step for many to do because they do not see losses in their bank account, but as we see $ 4/gallon gas, $ 3/gallon milk and skyrocketing commodity prices, many are aware. They have only to recognize the simple fact that prices do not increase the value of the U.S. dollar is declining.

Who is not affected by a falling dollar? The poor, debtors, manual workers and craftsmen (because you can continue to carry out your trade in dollars, pesos, or bananas, if necessary, regardless of the continuing image of the dollar?? Morning, you can charge twice as much, but so what ?) But if you have any property, a house or a stock portfolio, denominated in U.S. dollars, declining U.S. Dollar should be the most important issue to you because that portfolio is losing value as the dollar does. In the worst scenario, the Fed can default making the U.S. dollar worthless overnight.

Best case, but it hardly worth mentioning, that the Fed would raise rates to 10%, Bush could declare a flat tax, of open borders for foreign investors through deregulation and tax cuts, pulling the U.S. military from all foreign involvement and the Banker in the world. This would catapult the U.S. economy and U.S. dollar to the current unbelievable success, but this is a farfetched fantasy. In reality, we are increasing our military presence around the world, reduce interest rates and regulate the U.S. markets, forcing even homegrown companies to look abroad.

Let us examine why the dollar is declining and what can possibly stop the decline.

The largest operator in the U.S. dollar is clearly the Fed, is the sole issuer of U.S. dollars. Investment banks and hedge funds, at the end of the day, rely on the Fed for regulation, clearing, liquidity and exchange controls, they are distributors and traders in U.S. Dollars is not the manufacturer. It is clearly stated on the Fed's website that the Fed conducts foreign exchange operations in the open market, and maintains the U.S. holdings of foreign exchange and swaps. This would indicate that the Fed is able to intervene in the foreign exchange market in order to protect the strong dollar, and although the Fed may have this option, it says in the same article that:

U.S. monetary policy actions affecting exchange rates. The dollar exchange in terms of other currencies is one of the channels through which U.S. monetary policy affects the U.S. economy. If the Federal Reserve actions raised U.S. interest rates, such as foreign ex-change value of the dollar generally would rise. An increase in the foreign exchange market value of the dollar, which in turn would raise the price of foreign exchange of U.S. goods traded on world markets and lower the dollar price of goods imported into the U.S.. By restricting exports and increase imports, these developments could lower production and prices in the economy. In contrast to an increase in interest rates in a foreign country can increase demand for assets denominated in the currency of the country and thereby reduce the value of the dollar in terms of that currency. Else equal, U.S. production and price levels would tend to increase, the opposite of what happens when U.S. interest rates rise.

Fed therefore officially govern exchange rates in U.S. dollars through monetary policy. Fed, in response to a weakening U.S. economy and the Subprime crisis, has taken an aggressive policy to reduce interest rates and thus drop the dollar.

So we can not expect the Fed to solve the weak dollar, because they are the makers of it! Fed may start to aggressively raise interest rates and we could see the dollar rising to new peak. But there is a small chance that it happens because they have shown the opposite. When the credit crisis unravels, we can expect the Fed to continue cutting prices. With a weak stock market, a weak real estate market and a weak economy, we can expect more doom and gloom before we see the light at the end of the tunnel, and in the meantime the U.S. dollar could fall further 80% or more of the Great British Pound did when it lost its status as reserve currency.

Technically, once a downward spiral starting in the currency, it is very difficult to stop. In stock, an issuer may buy back shares to dry up liquidity and stabilize the price, a common practice among penny shares listed on the pink sheets. But if the U.S. Dollar is falling, the Fed needs to euros to buy back U.S. dollars, and because the Fed is not an issuer of euro, it would take a near act of God to persuade the ECB to loan the trillions necessary to support the dollar in the event of a standard or run on banks. Although the Fed has no procedures in place to stabilize markets, to act to support your own currency is to withdraw from a sinkhole with your own hair. When the selling starts, it can feed on itself and create a downward spiral?? as the value goes down several large owners, worried about further losses, may panic and sell, in order to add fuel to the fire.

It would be something other than capitalism if we do not withdraw this once in life opportunity for a falling dollar. On the one hand, wealth will be wiped out en masse?? on the other hand, it will be created. A transfer of paper wealth from the dollar to the Euro and other currencies is inevitable, why be on the wrong side of the fence? Germans, Argentineans, Japanese, French, Britons, Italians, Turks, and many others, can testify to the events surrounding the currency collapse and hyper inflation. They say it can not happen with the U.S. because of TBTF too big to fail policy, a misleading argument, which came from a Senate hearing on bank regulation.

All facts and economic data pointing to massive dollar divestment process to watch a USD / CHF chart, and you can easily see it has already begun.

FX as an asset

Are there many different ways to invest in FX as an asset, but this should only be done with the help of a qualified professional or someone with experience in FX. Ever Bank offers foreign currency CDs and foreign currency deposit accounts: https: / / www.everbank.com/ This will not excite most investors, but at least you can get non-dollar deposits insured by the FDIC.

For a more comprehensive approach, CTA Offers FOREX accounts, usually with the smallest starting at $ 10,000. These accounts are pure FX trading strategies, some are very conservative and others are very aggressive. Different strategies can be implemented on those accounts that vary from simple news and financial analysis of business with 20 years experience, to fully automated systems Quant.

Funds, such as Merk hard currency fund offer FX specific yield of a fund. From their website: http://www.merkfund.com/

The Merk Hard Currency Fund (MERKX) is a no-load fund that invests in a basket of hard currencies from countries with strong monetary policies assembled to protect against the depreciation of the U.S. dollar relative to other currencies. Many consumers are aware of the falling dollar but do not know how to protect their capital against its decline. Others are uncomfortable choosing specific foreign currency to invest in or investing in currency derivatives. The Fund may serve as a valuable diversification component designed to protect against a decline in the dollar while potentially mitigating stock market, credit and interest risks-with the ease of investing in a fund. The Fund may be appropriate for you if you're running a long-term goal with a hard currency component in your portfolio, are willing to accept the risks associated with investments in foreign currency, or looking for a way to reduce the risk in or profit from a secular bear market.

Hedge funds are another place for FX invest, but they usually have a $ 1 million minimum and employ risky strategies.

FX overloading

If a company or the portfolio has exposure to several currencies, a hedge program can be implemented that combines several different strategies to manage currency risks. Large companies that Intel may have their own treasury desks, but smaller companies or financial firms may not have the resources or knowledge to justify such a program, but there are many companies offering this service, or if it could be built using proven designs from the ground up.

FX as an industry

Explosive growth opportunities exist in the FX industry, American investors take notice. The real opportunities in FX are in marketing, because of widespread lack of knowledge of FX. Unfortunately, you do not know much to make a fortune in this area, and there are marketers who will ultimately make the most, as they introduce a uneducated and unenlightened public in the most significant of our time. What comes out of work real estate developers to make the reserve as the market continues to weaken?

Imagine FX Scams!

Since FX is fully liberalized, FX attracts many criminals. The allure of a mysterious market only traded with the large banks make a good pitch to unsuspecting suckers. But there are some simple ways to determine the fraud from the real thing, such as the NFA, CFTC, SEC, or by dealing with only companies and individuals who associate themselves with large FX firms that are registered with the NFA. The fact that FX attracts criminals does not reduce the possibilities FX anything more than the movie OILER Room shows that all stock brokers are cocaine SNORTING crooks.

This article is not exhaustive, nor is it intended to be. In the case of partiality on the issue, given that we are in this industry, the fact that these opportunities exist, and the fact that the dollar has fallen, is why we in this business and not in shares or bonds. A day may come when the FX is the only significant remaining in the world, as domestic stock markets plagued by reckless monetary policies and rogue political administrations. In the meantime, protect yourself against disaster, and position yourself to take advantage of the possibility of a lifetime.

If you are not familiar with Elite E Services, we recommend to buy gold at 279 and invest in New Zealand U.S. dollars in 2002 when the NZD / USD was 39. George Soros made his fortune trading currencies, not sell stocks. In the mid-1990s, Intel has made more money than selling in FX processors.

February 26, 2008 - This day will be remembered by many as the last day of the dollar reserve capacity status. Do we remember the U.S. Dollar and in good times.