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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: energyplay who wrote (7103)	6/9/2006 4:20:17 PM
From: Seeker of Truth	Respond to of 217792

Just now I read a quote of $69.89 for Brent crude. That suggests that the US dollar is not appreciating with respect to oil. And please note that the balance of payments deficit is still there as are the enormous holdings by Japan and China of US bonds. If everybody and his sister is Japan and China then oil is safer than US bonds. So, sort of like you I anticipate a further 20-30% depreciation of the US dollar with respect to oil over the next 2-3 years.

To: energyplay who wrote (7103)	6/10/2006 9:28:31 AM
From: Riskmgmt	Read Replies (1) \| Respond to of 217792

Thank you for answering why. Your reasoning makes a lot of sense. "Why ? Here's the sort of reasoning that is involved..." I can see where, when the Fed overnight rate was at 1%,(Prime 3 1/2%), smart money would flow into anything that promised a higher return and a hedge against the likely event of a depreciating dollar, given the deficits etc. Commodities, real estate etc. So with you so far. Today, the rate is 5%,(FED funds rate) and likely to go to 5.5%. We might expect copper to gain 7% for the year, with a range of -10% to + 15%. Since the risk / reward is not good enough,the trade will be closed out Again, makes total sense. Now I will argue that the predicted death of the US dollar is exaggerated. I expect the USD to loose value long term (maybe 20-30% from today, June 9, 2006), but not fall apart - Okay, this is where I get foggy. As everything, is relative to everything else, we need to define "loose value" relative to WHAT? If relative to commodities, copper, gold, etc., maybe, but didn't you argue that risk/reward was not good with interest rates at 5% and going higher? Relative toother currencies GBP,CAD,AUD,EUR, etc., maybe, but it certainly has risks too. Europe has it's own printing presses and it is a bureaucratic nightmare. Australia and Canada are relatively small players and as commodities go so go their currencies. GB is inflating it's currency worse than the USA. The safety of US treausry paper - the "flight to quality" is also a reason US treasuries are going up in price. That can be a very powerful driver when fear increases. This is why, with the possible exception of oil and gold, which I will cover later, I think there is and will be, greater demand for US dollar and T-Bills and T-Bonds. as rates rise they will attract more funds looking for safety and return. Gold is not an alternative investment it is a hedge. As James Grant says "Gold is something different. You buy it solely for macroeconomic considerations. I buy gold as a hedge against the stewards of paper money. There is much that nobody can know-critically, for example, what the price ought to be. It's guesswork." Which leaves oil. I am not smart enough to know whether this planet is running out of oil. I had an oil exec for Shell tell me about 5 or 6 years ago we were more likely to see oil below $10 a barrel than above $50. Other experts, say the opposite, what is true? I do know that in the early 70's there were billboards with a fuel gauge super imposed over a picture of Earth. The fuel gauge was showing empty. It was a political message conveying the idea that the incumbent party had allowed us to "run dry" of oil. The news talk was all about "gas guzzlers", gas station lines, making smaller, more efficient cars, oil prices going through the roof. Several years later it was all forgotten, bigger faster cars were the fashion the SUV became the new "in" thing, speed limits went up and gas prices down. So, while I do not know what the supply and demand ratio on oil is, or will be in future, history suggests that having run up from $20's to $70's in about 5-6 years it might well trend lower, especially when and if we no longer have a Texas oil man as President. I'd say the risk reward there doesn't look great either. So all in all I agree with Russ the T-bills look good as a way to park money for now, with perhaps some gold as a hedge, as outlined and perhaps some foriegn interest bearing instruments as a diversification. Your comment My time frame for the physical gold I have is 3 years to maybe 7 years. does this mean you are in gold for appreciation and expect it to run up to where you would exit because it was ahead of itself?