Hi again. I know you just received an email from me, but I had some other ideas and believed that they would be useful to you.
I am very bearish on the Euro for the next few months. As I have been writing recently, the U.S. dollar could rally for a few months. But more than other currencies, the Euro is vulnerable. The Euro politicians are at it again; trying to allow bigger budget deficits and weaken the European Central Bank. They would like to proceed with more spending programs. This is bad for the Euro and good for the British Pound, Norwegian Krona, Swiss Franc and the U.S. dollar. If you are a European who does not want to own too many U.S. dollars for the long run, you might consider switching away from the Euro into other European area currencies.
INFORMATION AND DISINFORMATION
We have all heard a great deal about Seymour Hersh’s article in the New Yorker magazine stating that the U.S. has troops doing intelligence gathering in Iran. I do not claim to be a highly sophisticated observer of foreign affairs, but it is obvious that every major country must have military and civilian intelligence operatives in every other major country on earth. The U.S. does, and so does everyone else.
I do not know if Mr. Hersh’s source gave him factual information or planted disinformation for him to publish. Intelligence organizations often do plant disinformation to manage the psychology of one group or another. I only know that we should not be surprised to learn that every major country is engaged in espionage (and worse), in order to strengthen what they see as their national interest.
As Larry Jeddeloh of the Institutional Strategist has been pointing out for years, the war in the Mid-East will be several campaigns and they will take a long time. It may be that Saudi Arabia is the next campaign or it may be Iran. In any case, there will probably be substantially more fighting in the Mid-East before it is over.
All of this is good for oil, natural gas, coal, and other energy stocks. We hold them and we will be buying more in periods of market weakness.
WORLD STOCK MARKETS
With one or two exceptions, like Russia, there are few countries, which are beneficiaries of higher oil prices, where we would be willing to invest. This is why for accounts which permit short selling, we plan to hedge our long positions with short sales. For clients who do not allow short selling, we plan to hold larger cash positions, and hold a larger percentage of energy and high yield income stocks in the portfolios.