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International Investments



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International Investments - Changing Markets by the Minute

By Gary Scott

It’s already over. The longest day of the year. Look at it another way. Summer just began. Yet each day, in the full glory of summer’s heat, minute by minute we creep towards the darkness and the cold. Tomorrow the sun will rise a little later and set just a bit before. The tunnel is at the end of the light!

That’s life and perhaps that’s the way it is with freedom. Just this month the papers have screamed with erosions of our freedom. First, we discovered that our phone calls are bugged by the government. Next we read how the feds want web site servers to keep our email. Then just this week the Supreme Court gave easier access to no knock searches by the police.

None of these really matter on their own…but neither does the few minutes of daylight each day. Then suddenly we discover winter is here.

Fortunately on that coldest day, the sunlight begins to lengthen. The key is surviving and growing during the harsh times.

This is true in financial markets as well. Look at GM. Last week their credit rating was downgraded by S&P to B- from B. Moody’s downgraded the company to Caa1. This step was taken after GM was forced to provide security in connection with the extension of a credit facility. The company was under pressure and the security provision increases risk to unsecured bond investors.

Imagine mighty GM an American bastion talking about bankruptcy. In the US most of us were raised in Chevys. Now all they have are junk bonds, not to mention an unfunded pension.

This did not happen all at once but little by little, minute by minute. These things creep up on us.

This is true as well with inflation and a falling US dollar. Minute by minute American debt rises and the purchasing power of greenbacks and American savings and income erode.

One way to protect against inflation is to hold strong currencies. For example we recently analyzed the major currencies and determined that the Swedish kroner may be strong. See the dollar dive series at spottingtrends.com/currency/currency_trends_13.htm

Jyske Bank now reports that the Swedish krona has been flexing its muscles and has probably not reached a stable level yet. They recommend holding long SEK positions and during any weakening of the kroner to add positions. The Swedish economy is strong, growth has improved, and there is also improved consumer and industrial confidence.

House prices are rising at a fair pace, and given the rising inflation rate, the Riksbank has long signaled that Swedish interest rates must go higher so short term bonds and money market positions make the most sense. You should check with your financial planner to see if holding kroners makes sense for you. You can get more details on how to invest in kroner from Thomas Fischer at Jsyke Bank. His address is fischer@jyskebank.dk

Until next message, good investing and health to you.

Gary

June, 2006

 

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All contact copyright Gary A. Scott (1968-2006) unless noted otherwise