The Daily Reckoning
Weekend Edition
February 26-27, 2005
Baltimore, Maryland
By Addison Wiggin and Tom Dyson
MARKET REVIEW: MARKET ROCKETS
Central bankers around the world are ditching the dollar.
This week, we add another signatory to the list - South
Korea. In a report to a parliamentary committee on February
18, South Korea's Central Bank said it was planning to
increase investments not denominated in dollars.
South Korea has the world's fourth-largest currency
reserves, behind Japan, China and Taiwan, according to data
compiled by Bloomberg. It is also the fifth-largest foreign
owner of U.S. Treasury Bonds. This statement was a big deal
and the currency markets reflected this by punishing the
dollar...
Against the euro, the dollar was down 176 points, from
$1.3008 to $1.3243 last week. Against the pound, 247 points
were shed, so that a pound is now worth $1.92. The South
Korean won jumped to an 87-month high.
But South Korean central bankers aren't the only officials
with an opinion on the dollar. Some Australians are equally
concerned.
Australian Treasury Secretary Ken Henry thinks the spirit
of the Nasdaq bubble has reincarnated. Last week, speaking
to a group of Asian treasurers, he likened the flood of
money pouring into the U.S. to support its budget and
current account deficits to the stock market's dot.com
bubble of the late 1990s.
"Peter Costello's [Treasurer of the Commonwealth of
Australia since March 1996] closest adviser fears the U.S.
is heading for a devastating financial crash that could
ravage Australia's economic growth," reports the
Australian. "The financial crash feared by Dr. Henry would
involve a sharp fall in the U.S. dollar and a bond market
sell-off, which would push up U.S. and world interest
rates."
This is good news for holders of gold...like us.
On Thursday, we converted the sum total of our savings from
2004 into gold coins and then wrote the experience up in
Friday's edition of the Rude Awakening. Judging by the
quantity of emails we received shortly after the piece was
published, we are not the only ones with an interest in
gold coins.
In today's edition, we'll pass on the expert recommendation
of Dana Samuelson, one of the many numismatists we spoke to
at the convention. We asked him what we should buy, given
that we know nothing about gold coins, that we can't spend
more than $10,000, and that we plan to hold for the long-
term.
The $10 Liberty, the $10 Indian and the $20 dollar Liberty
would be good coins for our purposes, he said, but make
sure they are graded either MS-64 or MS-65. They have
excellent leverage to the gold price, they're scarce, and
they're affordable, he told me. What's more, they hold
their value extraordinarily well. Dana calls these coins
'Market Rockets.'
To prove his point, he produced recent price charts for all
three coins, noting that while gold fell from $455 in
December to below $420 a couple of weeks ago, the prices of
these coins had not budged. Yet, when gold goes up – like
it did in the last quarter of 2004 - the coins spike
upwards.
"I wouldn't be at all surprised to see gold in the $480 to
$550 range by 2006," he said. "If you want an aggressive
prediction from me, I'd say any one of these coins could
double in value with gold in that price range."
Last week, gold was moving in the right direction, powered
by moves in the forex markets. Our favorite yellow metal
gained almost $8 on the week, to close at $435.20 an ounce.
For all the market statistics from last week, scroll down
to the end of this email,
Regards,
Tom Dyson,
The Daily Reckoning
P.S. Kevin Kerr, commodity trader extraordinaire, says it's
only a matter of time before gold rallies past $450 and
towards $500. We don't doubt him...of Kevin's last 16
commodity trades, all 16 turned out winners...a perfect
100%! [Ed. Note: For the full details of Kevin's track
record, see here:
Kevin Kerr's Track Record
http://www.agora-inc.com/reports/RTA/maniacF315
"I can just tell, because the dollar sold off so much on
the announcement that South Korea wants to diversify its
currency holdings," Kevin writes. "Wham! The market sold
off the dollar lickety-split. Then, the recovery was less
than stellar..."
Check out 'Flotsam and Jetsam,' below, for more commentary
by Kevin Kerr...
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Ayn Rand was Alan Greenspan's mentor. So even if you
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This is an easy-to-read introduction on the Ayn Rand and
the Objectivist movement. We suggest you take a look:
Ayn Rand and Business
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------------------------
THIS WEEK in THE DAILY RECKONING: We welcome economist Mark
Skousen to the roster this week for the first time. Mark is
an economics professor at Columbia University and author of
20 books. Also, on Tuesday, we published an essay by Doug
Casey on his hunt for property in Cyprus. It's an extremely
interesting piece on the effects of national hatred on
property prices...
Literary Economics 02/25/2005
By Bill Bonner
"
Bill Bonner examines the differences in the America's
economic structure since the last decade of the 20th
century. He points out that the world very rarely does what
we want it to do, and more often it does exactly the
opposite."
http://www.dailyreckoning.com/Issues/2005/DR022505.html
The Fatal Flaw in Social Security and Medicare 02/24/2005
By Mark Skousen
"
If social welfare programs are only offered to people who
meet the strict criteria for government aid...why do we
give out billions in Social Security and Medicare - to
people who don't need financial assistance?"
http://www.dailyreckoning.com/Issues/2005/DR022405.HTML
Investing in the Bubbles of Tomorrow - Today 02/23/2005
By Chris Mayer
"
Investors are always looking for the next big thing to
make them rich...but how can you be sure that your "sound
investment" doesn't turn out like the tech bubble of the
90's - just a flash in the pan?"
http://www.dailyreckoning.com/Issues/2005/DR022305.html
Property Hunting 02/22/2005
By Doug Casey
"
Despite all warnings, the real estate market is still
quite tempting to some...Doug Casey recommends that if you
must become involved, choose properties off the beaten
path...after you've done you're research, of course."
http://www.dailyreckoning.com/Issues/2005/DR022205.html
The Mutant Debt Monster That Ate The World 02/21/2005
By The Mogambo Guru
"
It may be a holiday, but the Mighty Mogambo never
rests...at least not when there's something out to destroy
the entire world as we know it. No, it's not Godzilla, or
little men from outer space...it's much, much scarier."
http://www.dailyreckoning.com/Issues/2005/DR022105.html
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------------------------
HEADLINE, NEWS And INSIGHT: This week's website
articles...Sometimes Bill writes too much and we have to
cut an extract from the DR. Here's where you get to read
it. Porter's piece on AT&T is a well-researched and clearly
written case study on the failure of the telephone giant.
Highly recommended reading:
The Wealth Illusion
By Bill Bonner
"
Who worries that we have no savings...and now depend on
the kindness of strangers in order to maintain our
standards of living and that the Chinese or Japanese could
bring the United States economy to its knees with a single
word?"
http://www.dailyreckoning.com/Featured/TheWealthIllusion.html
Adios, AT&T
By Porter Stansberry
"
Had AT&T defined itself differently, AT&T could have
easily been one of the world's biggest companies instead of
being out of business."
http://www.dailyreckoning.com/Featured/AdiosATT.html
------------------------
FLOTSAM AND JETSAM: Kevin Kerr, our resource trader,
provides this week's roundup from the commodity markets...
Kevin Kerr:
Another incredible week for our portfolio as we watch the
energy markets surge toward $60. The basic fundamentals I
have been telling you about for months are still well in
place. In addition, the cold snap and snow in the Northeast
are reminding traders that winter can still take a bite,
and there are a lot of 'degree heating days' left in 2005.
The bottom line is all of our energy-related holdings are
performing incredibly well and should continue to do so as
prices steadily rise.
This week in Resource Trader Alert, we grabbed big profits
in soybeans and soybean oil - BIG PROFITS! The best part is
that we had already made money on the short half of an
options spread in soybeans, and then proceeded to grab
profits on the long half of the trade.
Absolutely unprecedented profits, if I do say so myself. I
am not one to gloat, or encourage traders to gloat, but I
have to point out that we made profits 16 out of the last
16 trades in RTA... WOW! It's not complicated, but it
works. If you are interested in the grains or resource
markets in general and want to take it to the next level,
then I hope you consider joining us.
Resource Trader Alert
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***Gold
Gold has really pleased me this week, as the dollar has
been smacked down again. It's only a matter of time now
before gold rallies toward $450 and then $500. I can just
tell, because the dollar sold off so much on the
announcement that South Korea wants to diversify its
currency holdings. Wham! The market sold off the dollar
lickety-split. Then, the recovery was less than stellar.
This is a clear indicator that the dollar has extreme
weakness. Gold, on the other hand, now seems to have turned
former resistance into support, and this could be the
launching pad for gold's next run higher.
***Next Week
Look for another big week next week. I will bring you all
the action. I have arranged to visit the New York
Mercantile Exchange and the New York Board of Trade with
several of my OI colleagues. We will all be reporting to
you what we learn and what we can find out from exchange
officials about any new resource futures and what resources
and related equities may be on the horizon.
Yours for resource profits,
Kevin S. Kerr
[Ed. Note: Kevin would love to have you as a member of RTA,
and share in the success. He hates it when we say this, but
Kevin is a naturally gifted trader and consistently beats
the market. Lately he's been really hot...16 out of 16
trades made a profit! Like any experienced trader, Kevin
knows that luck plays an important role in stats like this,
but his expertise is undeniable. Here's how you sign up...
Resource Trader Alert
http://www.agora-inc.com/reports/RTA/maniacF315
The Daily Reckoning is a free, daily e-mail service brought to you by the authors of the NY Times Business Bestseller Financial Reckoning Day.
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