Many people think of the currency market as the province of wheeling and dealing risk seeking swashbucklers. They envision currency traders moving from one conquest to another—throwing caution to the wind. Well there are some of those guys in the market, but they usually don’t last very long. The reality is you make money by devising an investment strategy based on solid fundamental and technical analysis and then tailoring your investments to your specific risk/reward objectives. Choices abound!
The articles below originally appeared in our montly newsletter, The Sovereign Individual and will give you some of the basics. You can learn more about the Currency Market in The Sovereign Individual each month by becoming a member of The Sovereign Society. Click here for details on membership.
More About Investing in Currencies
Why You Should Stock Up on the Beleaguered Buck
Just Ahead of This Year’s Rally
I’d venture to guess that one of the top five global macro themes among investors last year must have been: “Global economic growth no longer depends on the U.S. economy.” After all, how else could you explain investors’ behavior across the various asset classes and markets?
For starters, China won’t stop gobbling up natural resources. China’s new energy habits are pumping life into both developed and emerging markets where China does its buying. And speaking of buying, expansion across Europe bolstered regional demand for Chinese goods.
In the first 11 months of 2007, we watched as the euro rose to record levels, the British pound shot past the US$2 mark and the Canadian dollar sailed beyond dollar-parity because investors are so optimistic about the global economy.
And when it comes to the U.S. economy and the U.S. dollar, the glass is half-empty at best. Price action among all currencies point to the fact the global economy will decouple from America’s economy.
But I see two scenarios set to paint the decoupling theory as either fact or fiction…
Scenario #1: Uh Oh. Recession Time for the U.S.
Read More...
Booming Commodities Leave Their Footprints on a Few, Fortunate Currencies
by Sean Hyman
We haven’t seen a commodity rally like this in years.
Just this fall, we watched as oil climbed above an all-time high of US$83 a barrel. Gold topped US$751 an ounce — the highest it’s been in nearly 30 years. Agricultural commodities and livestock prices soared.
This commodities boom has boosted several of the world’s biggest commodity exporting countries. It’s carried these respective currencies into territories not seen in nearly 30 years. We’re living in amazing times. Just look at what commodities have done overall just this fall. The moves have been parabolic.
The Who’s Who of Gold Miners
As I said, gold recently traded over US$751 an ounce for the first time in nearly 30 years.
Australia is the world’s second-largest miner of gold. So of course, the Aussies love this gold boom. They’re pulling gold out of the ground at their usual fixed price. But their profit margins are soaring as gold continues its steep ascent. So you can imagine what this has done for Australia’s economy. No wonder Australia’s job reports and retail sales have been so strong.
Fortunately for Australia, inflation has also been very high. This has forced the Reserve Bank of Australia to raise interest rates many times this past year. They’re expected to hike rates further in the near future. In fact, some economists are saying that a rate hike could come as soon as November. Since inflation continues to increase, it can’t be ignored. It has to be tamed. How do you tame inflation? By raising interest rates.
So here’s a question for you. Where would you rather send your money?
Read More...
Jump into the Currency Markets and Profit from Further Global Risk with this One Easy Trade
By Jack Crooks
By the looks of it, industry insiders are becoming more and more aware of what really drives global markets — foreign exchange. As the global economy grows stronger, countries become more tightly linked to one another. And that link is based entirely around money changing hands — or, in other words, foreign exchange. The volatile way in which financial markets around the world have been behaving lately can be chalked up to bad loans and collapsing credit. A key driver behind the seemingly unlimited availability of money is once again, foreign exchange.
How bad is the situation in the U.S. financial system? Well let’s put it this way: Jeopardy, the popular TV quiz show, is about the only place you could make money by taking shares of the United States.
Read More...
The Currency Revolution
by Jack Crooks
There’s a revolution happening in the currency world. Imagine posting double digit profits, with low cost trades and unlimited liquidity without sitting at your computer all day. It’s all possible with the brand new currency exchange traded funds (ETFs). These were just launched a few months ago. In fact, few investors even know they exist. These are truly unique. In fact, I would say they are revolutionary.
Find Your Comfort zone - Then You’ll Know Where to Play
The first step in the process is finding out who you are, in terms of investment style. Your style shouldn’t necessarily change just because you’re trading in the currency market. What’s worked for you in your stock or bond investments, and the knowledge you gained there, applies to your currency investments. Sure, there are some idiosyncrasies in the way currencies move compared to stocks and bonds, but most of what you know is transferable. So don’t think you need to start from scratch or change your style.
Once you’ve completed your self-analysis, you need to choose the best way to access the currency market which fits your investment comfort zone. Here are your choices...
Read More...