THE SOVEREIGN SOCIETY OFFSHORE A-LETTER
Your Link to Freedom, Privacy & Prosperity in the Offshore World
Monday, November 22, 2004 - Vol. 6 No. 224
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In This Issue:
* COMMENT: That Still Falling Dollar.
* OFFSHORE: Bermuda Restless. Panama Stable. Offshore Is Where? Swiss & the EU: Battle Goes On. Channel Islands Challenge.
* WEALTH: The Parmalat Excuse. Armey Likes Flat Tax.
* PRIVACY & RIGHTS: U.K. Civil Rights Curbs Planned.
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Our guest column is by Mark Nestmann, editor of The Sovereign Society's monthly newsletter, The Sovereign Individual.
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COMMENT: That Still Falling Dollar.
Dear A-Letter:
As predicted, the US dollar continues to make the downward move we, among many, knew it would. The downfall wasn't that dramatic, despite extensive media coverage. Since Oct. 1, the dollar has declined 5% against the euro and Canadian dollar; 6% against the Japanese yen; and 7% against the Swiss franc. A large and sustained decline like that in the hands of an experienced currency trader can lead to big profits. Someone like our friend, Barbara Rockefeller, an international economist with over 25 years experience in the currency markets.
A few weeks ago in the A-Letter, we quoted Barbara's prediction that the dollar's downward spiral would continue if Bush was re-elected. And in due course, that's exactly what happened.
After the Nov. 3 election, Barbara, editor of Money Trader, the first currency and bond options trading service for individual investors, saw her recommendations skyrocket. When she finally cashed in Nov. 11, Money Trader readers made:
* A gain of 178% or on her Swiss franc call option recommendation, resulting in a profit of $1,600
* A gain of 251% on her Canadian dollar call ($3,100 profit)
* A gain of 34% on her euro call ($800 profit)
* A gain of 42% on her Australian dollar call ($570 profit)
* A gain of 25% on her British pound call ($506 profit)
The total gain came to nearly $6,600 in less than a month, although there was one losing trade, which dropped the net profit down to a little more than $6,000, less commissions. Plus Barbara has a 'euro bull call spread' still open that's resulted in a 202% gain since she first recommended it in October.
These spectacular results show how it's possible for a pro to make big profits when the currency markets are moving in a sustained trend. What's ahead for the next few weeks? Barbara thinks the dollar will continue to sink, and she wants a piece of the profits. This time though, the move is choppier. Profits will be smaller and holding the positions will be more nerve-wracking. That means that you need to buy foreign currencies when the dollar is strengthening. That's never an easy thing to do, even for experienced traders.
The biggest reason the dollar is falling is world disapproval of a current account deficit that is 5.7% of GDP. Academic studies show that historically, 5% is a limit of 'sustainability' before a currency drops -- and drops 20-40%. What's more, US Treasury Sec. Snow has made it clear that the US will not intervene in the currency markets to stop the slide. Snow also warned his European counterparts not to intervene, either.
The problem is that by now, everybody and his aunt knows about the falling dollar, and worse, can tell you why and how far the plunge is likely to go. This smells like trouble. In 1929 when Bernard Baruch started getting stock tips from his shoeshine boy, he sold all of his stocks just before the crash. Eventually, there will come a time to cash out of foreign currencies and invest back into dollars. But now is not that time.
What that means, Barbara says, is that currency traders will be taking profits on much smaller dollar movements. So, if you bet on foreign currencies now, you must do it in a way that minimizes the risk for potential gain. One technique that professional currency traders use is called 'spread trading.' It's not 100% foolproof, but it's the best way to wring maximum profits out of the next step down in the dollar without undue risks.
Barbara's most recent recommendation to Money Trader subscribers is a spread trade with a risk total of $575 for a potential $4,400 gain. This is nearly a 1 to 10 risk-reward ratio, and one that dramatically increases the odds of profiting in these choppy markets. When the dust settles a few months hence, the dollar could be 20%-40% lower than today. There's absolutely nothing wrong with keeping core portfolio positions in foreign currencies to profit from this trend, but be prepared for the bumpy ride. But if you want to speculate in currencies, by far the most profitable method is with options - but only with professional guidance!
Mark Nestmann
Vienna, Austria
Editor's Note: Barbara Rockefeller is the author of numerous books on trading, the most recently published. Technical Analysis for Dummies. She is also the co-editor of The Money Trader, the first currency and bond options trading service for individual investors. To learn how you can enjoy big profits trading currency options, go to
LINK: http://www.agora-inc.com/reports/MTR/WMTREB02/