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Strategies & Market Trends : Value Investing

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To: Bill Wexler who wrote (28161)	9/20/2007 7:07:36 PM
From: E_K_S	Read Replies (1) of 78525

Hi Bill - You state: "...Explain how you deflate roughly $15 trillion out of this housing bubble + service $10 trillion in debt and keep earnings momentum going in an economy with a GDP that is 3/4 dependent on consumer spending...". It's simple in my mind. The US dollar will fall in value relative to many of the other world currencies. The safe investment is to use your valuable U.S. dollars now and buy natural resource companies and foreign assets. I believe the US dollar will fall 40% in the next three to five years, I have been buying foreign company's ADRs. I specifically like Brazil but I own ADRs in Australia, South Africa, Canada and Europe. If you cash out into US dollars and hold your proceeds in a money market fund, it will loose value relative to the other world currencies. finance.yahoo.com Other hard assets that trade in the world market include natural resources and oil. Notice that Saudi Arabia may not lower their interest rates and would break their tie to the U,S, dollar. Fears of dollar collapse as Saudis take fright telegraph.co.uk The standard for pricing oil may now be in terms of the Euro. Euro Breaks 1.40 as Questions Arise on Whether Saudi Arabia Will Break the Peg dailyfx.com Dollar Heads for Third Weekly Loss Versus Euro on Fed Rate Bets bloomberg.com For the first time that I can remember world oil purchases in Euros exceed those priced in US dollars. The value take here is that the world economy is discounting all assets that are pegged to the U.S. dollar. If you assume current cash flows and earnings from companies that generate U.S. dollars, in three to five years these assets will be priced less relative to other foreign currencies (perhaps up to 40% less) because the U.S. dollar will not have the same purchasing power. This is the easiest way for the FED to spread the pain for the huge U.S. deficits accumulated. The IRAQ "off book" expenditures ($200 Billion next year), social security and medicare unfunded liabilities just add to this problem. I believe that a 40% or 50% devaluation of the dollar is going to be the way Mr Market fixes this problem. EKS

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