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Are Your Dollars Blowing
Away? - Troy Patton,
CPA
The 2008 market has had no lack of excitement.
The market has been up and down.
The
markets went four years without a 10% correction. Yet back in 2007, we saw
two 10% downturns. Yes the markets have rebounded nicely, but this is one
of those years where conservative thinking will pay off. Why is this?
This way
your portfolio will be well positioned for future performance. It never ceases
to amaze me how investors clearly pay too little or too much for an investment.
When we
were young, let us recall what our parents told us, “just because your friends
jump off a bridge does not mean you should also!” Right now we are
witnessing a lot of crowd driven behavior.
The media
talking heads know that FEAR sells papers and commercials and they do their best
to portray this in the market. How many people are going to read a headline
which says, “the markets really have not moved much this year?” Not many.
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Take a
look at the 10 year Treasury yielding as I start writing this article
around 4%. Frightened investors have pushed bond yields to a level which makes
extremely limited sense to buy something that is going to lose money if you hold
them to maturity or even in the midterm.
On the
other extreme, we hear things like, “the Chinese are buying, or folks think
someone knows something they don’t. Staying true to an investment philosophy is
difficult at times, but those who change with the blowing wind will usually be a
day late and dollar short.
Speaking
of the dollar, when we hear Big Ben lowering rates, we need to hear the
words inflation. The dollar has lost much ground this year. In fact, it is the
largest worry I have in the markets as well as some fear of a worsening credit
crunch.
I think
the dollar is going to continue to see pressure as the Fed continues to print
money and the government uses our dollars to pay for the ongoing war in Iraq. In
fact, in dollar weighted returns, the market has returned about 10% less than
what is stated (read inflation).
Those who
travel overseas can clearly see this as our dollar has collapsed in value.
However, I expect a bit of a rebound in the dollar vs. the Euro. The US
Government is going to get continued pressure to boost the dollar. I think it is
only a matter of time before Paulson begins to start “talking” the dollar up a
bit.
In fact,
the inflation we will see over the next couple of years will ultimately
drive the Fed to increase rates as long as the credit crunch has subsided.
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Troy Patton, CPA
Archer Investment Corporation |
Those who travel overseas can clearly see this as our
dollar has collapsed in value. However, I expect a bit of a rebound
in the dollar vs. the Euro.
The US Government is going to get continued pressure
to boost the dollar. I think it is only a matter of time before
Paulson begins to start “talking” the dollar up a bit.
In fact, the inflation we will see over the next
couple of years will ultimately drive the Fed to increase rates as
long as the credit crunch has subsided.
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 Have
a finance question or a comment for me?
Send
it to
tony@financegeeks.com
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