Mostly: Classical

[Frank Pembleton]

What's Behind the Demise of the Dollar?
By J. Christoph Amberger

“The more we think of it, the more devilishly elegant and marvelously scummy it is,” write our friends at The Daily Reckoning today. “The fall of the dollar, that is. It wipes out trillions worth of debt… with no bankruptcy proceedings, no lawsuits, and no backlash from the voters.

“While it makes Americans poorer, they hardly notice; the immediate loss is taken by someone else. It passes the loss from American debtors to foreigners who were dumb enough to take our IOU’s.”

We pragmatists at the Taipan Group are bemused… considering that two years ago, the sentiment of the perma-bears was that the poor old greenback was too high. Back then, they were seconded by the clamor of US manufacturers and exporters who bewailed their chances of competing against low-priced European and Japanese competitors.

But I think this is a trademark of contrarian dogmatism: For a dyed-in-the-wool contrarian, there’s no “Goldilocks” alternative, no environment that is “just right.” Stocks will always be “too high”… earnings “too low”… with perceived bubbles inflating and deflating like a bellows on an Episcopalian country church organ during the wake for the blue-rinsed chairwoman of the parish gardening society.


***For those deliberately or intuitively following the opportunities presented by a dynamic global financial market, there’s no such thing as waiting for elusive utopias demanded by Austrian School economics.

e-Dispatch reader Alain V., who commented yesterday about Germany’s welfare-state discouragement of private real-estate ownership, looks at the world from the vantage point of a true Taipan:

“It is not only US real-estate investments that are interesting for Europeans. I am now using my strong euros to buy myself promising US stocks that are naturally quoted in US dollars. I look for corporations that have potential for several years of double-digit earnings growth, so that I can get a decent return on investment and at the same time - in let’s say five years - earn a good return on shifting exchange rates once the dollar regains its previous strength compared to the euro given the good economic performance of the US compared to the Eurozone.

“You’ve got to be smart when you are ruled by morons, on both sides of the Atlantic. The free-spending Americans are building huge mansions heated by natural gas boilers and cooled with air-conditioning systems fed by electricity generated in natural gas powerplants.

“A booming US economy means a lot of natural gas demand (22 Tcfy). The total natural gas capacity of onshore US producers is only 19 Tcfy and dwindling, resulting in a shortage of 3.5 Tcfy. So I invest in US onshore natural gas companies. This shortage equals high natural gas prices on the US futures market and loads of earnings growth for onshore US natural gas producers like XTO, CHK, and POG that have substantial reserves to exploit with low drilling costs. In the good US tradition, I give a bit of free publicity for them, since I already own them.”


***The more Americans buy, the more the Chinese produce, and the more energy Chinese factories and consumers devour.

China’s crude oil imports are expected to reach 120 million metric tons in 2004, up from an estimated 88 million tons last year… which in turn was up from 69.4 million tons in 2002.

Domestic supply is now seriously lagging behind demand, which means that imports from the Middle East, but also from Kazakhstan, Russia and Western Africa, will continue to rise. These countries provided 82% of Chinese oil imports last year.

Taipans are already positioned to harvest the profits of this increasing demand: Following our creed of dynamic diversification, we’ve recommended you hold shares of PTR:NYSE in your portfolio since 2001.

At Tuesday’s Taipan editorial board meeting, our China expert Siu-Yee Ng came prepared with a laundry list of other promising candidates that could match or exceed the 200%-plus gains we’ve scored on PTR. We’re right now in the process of whittling down that list to the best opportunity… which we’ll present to our Taipan members in the upcoming February issue.

Not yet a Taipan member? Find out how we could help you make six to seven times your money in 2004.


*** “Gov’t to sell U.S. bonds to BOJ for forex interventions,” reads a headline in the Kyodo News this afternoon. Japan, for one, can’t see the greenback emerge from its cyclical low soon enough. The Bank of Japan once again seems ready to spend mega-yen on slowing the dollar’s decline.

The Europeans, on the other hand, are in no hurry. The European Central Bank (ECB) certainly caused some gray hairs for their German colleagues - especially Germany’s Economics Minister Wolfgang Clement - by deciding not to lower their benchmark rates, which are still at 2%.

The Bank of England also held rates steady at 3.75%.

Meanwhile, European Commission lawyers working for Economic and Monetary Affairs Commissioner Pedro Solbes now deem Germany and France’s get-out-of-jail-free card for their breach of the Maastricht Stability Pact illegal… hinting at legal action.

No wonder the euro was… rising again.

Cordially yours,


J. Christoph Amberger
Publisher, The Taipan Group
http://www.247profits.com/Home_Page/247_BUREAUS/TAIPAN.html?Source=/Sites/eDispatch/eDispatch_Archiv...