Money and Markets: Dollar Soars Lower

Jupiter, FL (PRWEB) March 12, 2008 -- In this issue of Money and Markets, Larry Edelson takes a look at the value of the dollar comparatively to foreign currencies and its relationship with natural resources. Mr. Edelson examines how the dollar may rally in the upcoming months, but discusses how it could eventually lose another 40% of its value in the next four years.

Larry Edelson examines the value of the dollar comparatively to foreign currencies and its relationship with natural resources.

On November 7 of last year, $100,000 would have purchased:

?    119.97 ounces of gold; today 102.56 ounces. In other words, cash buys 14.52% less gold today than it did just three months ago.

?    1,037.66 barrels of oil; today it will buy 981.93 barrels. Cash has lost 5.37% when it comes to the price of oil.

?    12,694.38 bushels of wheat; today only 9,319.66 bushels for the same $100k. That's a loss of 26.58% in just three months!

The same can be said for the value of the dollar when compared to virtually every natural resource on the planet. $100k buys nearly 30% less corn, 29% less sugar, coffee almost 30% less cocoa, and nearly 33% less platinum!

And cash is not just depreciating against commodities. Cash is losing value against almost every currency on the planet, too! Dollars will buy less Swiss francs, euros, Japanese yen, Aussie dollars, Canadian dollars, less British pounds and even less Thai baht or Polish zloty.

There will be occasional rallies in the value of the dollar. As a matter of fact, we may soon see one that lasts a few months. But even so the U.S. dollar could lose another 40% of its value in the next four years.

First, the dollar needs to fall another 40% to balance out the huge trade and current account deficits this country has with the rest of the world, especially China. That means the DXY would have to fall as much as 30%, from its current level of 73 to as low as 51.

Second, a major bottom in the dollar will not be seen until sometime in 2012. Chief reason: Currencies historically have some of the longest, most durable trends of any market. Long-term studies of currency markets show that up to 90% of bear markets tend to last about 12 years.

A 12-year bear market for the dollar means it won't bottom until 2012. Four years from now, that $100k, which would have bought 119.97 ounces of gold three months ago and 102.56 ounces today will probably only buy you 45.45 ounces of the yellow metal, as gold's price skyrockets toward an eventual peak of about $2,200 an ounce. Cash will have lost fully 61% of its purchasing power. And it doesn't matter one iota that the U.S. economy is slowing.

That certainly won't make for a stronger dollar. In fact, it will have the opposite effect. As the dollar plummets and the U.S. economy stagnates, the resulting inflation will wipe out your paycheck in real terms, confiscating even more of your money. It's already starting to happen! In January, personal income in the U.S. rose 0.3%. But inflation eroded 100% of it; meaning real incomes gained nothing in January.

"The simple answer is this: Don't keep all your money in cash! In my opinion, the only cash you should keep on hand is roughly six months worth of living expenses. You should continue to invest all of your other money in assets that are going to benefit from what the Fed is doing to the dollar, including select foreign currencies, which are rising in value against the dollar, and where you can also get a nice return, select foreign stock markets especially those that are rich in natural resources and where billions of new consumers are driving their economies upward, and select natural resources and the companies that control in-demand commodities, the very same commodities that are also rising in value as the dollar plunges," states Edelson.

To read this issue online, please visit:

http://www.moneyandmarkets.com/Issues.aspx?US-Dollar-Losing-Purchasing-Power-1503

About Larry Edelson and Money and Markets

With nearly three decades of experience in precious metals and natural resources markets, Larry Edelson has played a pivotal role in training Weiss Research staff and in guiding Weiss Research's customers to prudent investments in the sector. His Real Wealth Report, Gold Trader Hotline and Energy Options Alert provide a continuing education on natural resource investments, with recommendations aiming for both profit and risk management. His team of technical analysts helps enhance the timing of investment recommendations with the aim of continually improving the performance results for investors.

Mr. Edelson is also a regular contributor to the daily e-letter, Money and Markets. Recognized as an expert in precious metals and natural resources, he is often called upon by the media for his investing views. Mr. Edelson has been featured on Bloomberg, Reuters, and CNBC as well as The New York Times, New York Sun, and Marketwatch.com

Mr. Edelson holds a B.A. degree from Columbia University.

Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.

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