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Posted by: thepinetree on 10/26/2010 12:41 PM
Updated by: thepinetree on 10/26/2010 03:54 PM
Expires: 01/01/2015 12:00 AM
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Weekly Market Update Week of October 25, 2010 ~by Donna M. Stevenson of Pacific West Financial Group
Copperopolis, CA...THE MARKETS: What is the G-20? What is a currency war? And what does any of this have to do with my money? If you’ve been asking yourself these questions, you’re not alone. The relationships that exist between global currencies and the officials who control monetary policy have been a regular feature in recent headlines. Why? Currency values affect international trade. When the value of a nation’s currency is low, it encourages countries with higher valued currency to spend money there because their exports are “cheaper” so to speak...
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When the value of a nation’s currency is high, its exports become “more expensive”, and nations with lower valued currency are discouraged from purchasing goods and services produced there. While recovering from a global recession that brought high levels of debt and unemployment, it’s no wonder countries would want an advantage when peddling their wares abroad. This scenario explains why there has been a measure of tension between the U.S. and China in recent weeks.
China’s currency (the Yuan) is widely seen as being at least 20% artificially undervalued, which has driven up Chinese exports, but has also amassed a U.S. trade deficit with China of $227 billion in the last year alone.1 Ripple effects of this trade deficit are being felt throughout the U.S. political system. In Congress, the House of Representatives has already passed a bill that would give the administration power to penalize countries judged to be manipulating their currency values to gain a competitive edge in international trade.
On Saturday, the Group of Twenty (G-20) Finance Ministers and Central Bank Governors met in Gyeongju, South Korea to pursue an end to battles over currencies, with the goal of maintaining trade balances. At this meeting, the world’s currency keepers agreed to "be vigilant against excess volatility and disorderly movement in exchange rates" and China agreed to "move towards more market-determined exchange-rate systems that reflect underlying fundamentals."2 Although the language is not strong enough to impose strict guidelines on anyone, the G-20 agreed to adopt "indicative guidelines," an intentionally vague phrase that is yet to be clarified.3
So how does all of this relate back to the average American investor? First, it is a reminder that taking a global approach to investing is prudent. Because currency values – like many other factors – commonly affect a country’s economic stability, it is better to avoid keeping all your proverbial eggs in one basket. Second, it can help you keep the right perspective when the dollar falls in value. Although a severely undervalued dollar would be bad, a slightly undervalued dollar can invite foreign money into our economy, boost domestic manufacturing, and create jobs.
ECONOMIC CALENDAR:4 Monday – Existing Home Sales Tuesday – Consumer Confidence, S&P Case-Shiller HPI (Home Price Index) Wednesday – Durable Goods Orders, New Home Sales, EIA Petroleum Status Report Thursday – Jobless Claims, EIA Natural Gas Report Friday – GDP, Employment Cost Index, Chicago PMI, Consumer Sentiment
HEADLINES:
Since August 27, when Federal Reserve Chairman Ben Bernanke signaled the central bank was likely to pump more dollars into the economy, the greenback’s value has fallen about 4.8% against the currencies of U.S. trading partners (data through October 15). Given the historical behavior of U.S. exports and imports, a sustained move of that magnitude should shrink the U.S. trade deficit by nearly $140 billion over the next two years. That’s the equivalent of an added 0.5 percentage point of economic growth in each year. 5
The Bureau of Labor Statistics has released data on regional and state unemployment for September. “Twenty-three states and the District of Columbia recorded unemployment rate decreases, 11 states registered rate increases, and 16 states had no rate change", the U.S. Bureau of Labor Statistics said as it compared numbers to August figures. 6
U.S. Treasury Secretary Timothy Geithner met China's Vice-Premier Wang Qishan on Sunday and "exchanged views" about economic relations between their countries, both sides said.7
The simple credit card is on its way toward a makeover. The familiar plastic cards may one day be overtaken by credit-transactions over cell phones. Next month, Citibank will begin testing a card that has two buttons and tiny lights that allow users to choose at the register whether they want to pay with rewards points or credit, at most any merchant they please. 8
QUOTE OF THE WEEK:
"Winter is an etching, spring a watercolor, summer an oil painting, and autumn a mosaic of them all." – Stanley Horowitz
RECIPE OF THE WEEK:
Pumpkin Cake A Delicious Fall Treat
Ingredients: 2 1/4 cups all-purpose flour 1 1/2 teaspoons baking powder 3/4 teaspoon baking soda 1/4 teaspoon salt 1 cup granulated sugar 1/2 cup firmly packed brown sugar 1 teaspoons cinnamon 1/4 teaspoon ground cloves 1/8 teaspoon ginger 1/8 teaspoon allspice 2 eggs 1 can pumpkin (15 ounces) 1/2 cup vegetable oil 1/4 cup milk 1/2 cup raisins 3/4 cup coarsely chopped nuts
Directions: 1. Stir together flour, baking powder, soda, salt, granulated sugar and spices. Set aside.
2. In large mixing bowl, beat eggs until foamy. Add pumpkin, brown sugar, oil, milk and raisins. Mix well. Add dry ingredients, mixing until combined. Stir in nuts. Spread evenly in 13 x 9 x 2-inch baking pan coated with cooking spray.
3. Bake at 350 degrees F about 45 minutes or until wooden pick inserted near center comes out clean. Serve warm or cooled with whipped topping or ice cream, if desired.
GOLF TIP OF THE WEEK:
Loosen that Grip
A common problem for most golfers is gripping the club too tightly. Tight muscles slow the clubhead speed, affect the club face at impact, and can even rob you of distance. Do you routinely top the ball? Grip pressure may be the culprit.
A constant light pressure – just tight enough to hold onto the club through the swing, but not enough to tighten the forearm muscles – will keep your upper body relaxed. This facilitates a full turn and acceleration through the ball. Golf is a funny game. So often it seems that the harder we try, the worse we do.
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Securities offered through Pacific West Securities, Inc. Member FINRA/SIPC.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative or named Broker dealer, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
1 http://www.guardian.co.uk/business/2010/oct/24/china-committed-to-letting-currency-rise-says-us
2 http://online.wsj.com/public/resources/documents/g20communique20101023.pdf
3 http://online.wsj.com/public/resources/documents/g20communique20101023.pdf
4 http://www.econoday.com/
5 http://blogs.wsj.com/economics/2010/10/23/number-of-the-week-big-boost-from-dollar-decline/
6 http://www.dailyfinance.com/story/unemployment-in-some-states-near-record-highs/19686445/
7 http://money.cnn.com/2010/10/24/news/international/geithner_china/index.htm
8 http://www.nytimes.com/2010/10/22/your-money/credit-and-debit-cards/22cards.html
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