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|Crude Oil||+$2.80 to $51.94|
I told you it was coming here in Money and Markets several weeks ago! Now, the Wall Street Journal is putting it right there on its digital front page: A headline that says “Dollar Sputters After Surge” and a lead paragraph that reads:
“The dollar’s record rally, which rattled everything from the oil market to U.S. corporate earnings, is running out of gas.”
The story goes on to cite several reasons for the unfolding trend change: The extreme nature of the dollar’s run, something that should only come along every few decades (described by me here in Money and Markets on March 10) … the relative improvement in the euro-zone economy versus ours (foretold here in Money and Markets on March 5, and reiterated again just last week) … and the potential impact of shifting Federal Reserve language (described here in Money and Markets on March 19).
|Slumping jobs number is putting pressure on the greenback.|
We saw the combined impact of all of these forces in Friday’s abbreviated trading session. The dollar gave up more than a cent against the euro within seconds after we learned the U.S. economy created just 126,000 jobs last month. That was far below forecasts in the mid-200s. Revisions to the tallies for January and February lopped another 69,000 off the yearly count.
Then this morning, New York Fed President Bill Dudley grabbed the mic and launched yet another clear, anti-dollar broadside! In a speech in New Jersey, he specifically called out the “significant rise in the value of the dollar” — and labeled it a “significant shock.”
He also lamented the negative side effects of the “steep decline in crude oil prices” (partially due to the dollar) … and noted the resulting fact that “U.S. oil exploration and drilling activity is falling off very sharply.”
The latest round of “verbal intervention” from the Fed comes on the heels of other comments from Dudley’s Fed buddies and other corners of the U.S. government. And it helped send the euro up by almost another half cent in the early going.
Then late in the day, we saw an intraday spike lower in the euro that unwound some of Friday’s gains. While I couldn’t identify a concrete catalyst, I think the increased volatility stems from the fact investors are realizing the dollar’s one-way run is coming to an end!
|“I started picking through the rubble in energy and emerging market stocks over the past few months.”|
So what’s next? Well, I started picking through the rubble in energy, emerging market stocks, and other contra-dollar assets over the past few months in my active trading services precisely because the greenback looked like it was running out of gas.
Sure enough, those moves are now starting to pay off nicely. Crude oil surged by more than $3 at one point today alone, while energy shares took off like a rocket!
It’s also why I bagged the last of the major gains I had racked up being short the euro in my Safe Money newsletter several weeks ago.
Now, I really can’t stress enough how I believe you should be doing something similar. There are potentially major profits out there for the taking if I’m right, and I’d hate for you to miss out!
So are you doing what I’m doing … and starting to make money from it? Or are you still hesitant to jump on “Big Reversal” trades? Are the Fed’s latest anti-dollar broadsides enough to overpower the European Central Bank’s efforts to devalue the euro? Or do you worry more about something like a massive “Grexit” causing another round of dollar declines?
You know the drill: The Money and Markets website is your best outlet to get your opinion on these questions heard!
|Our Readers Speak|
Two discussions — one about wages and one about California’s drought — turned fairly lively over the weekend in the wake of my column before the holidays.
When it comes to McDonald’s (MCD, Weiss Ratings: C+) and its latest announcement of higher wages, Reader Jim M. offered the following perspective: “As a retired business owner, I’ve always felt that a worker gets what he deserves. Observations of Wal-Mart and McDonald’s employees indicated that a fair percentage of them were overpaid at minimum wage.
“I also found it interesting that my employees fell within a reasonable range of their fellows. But it was interesting to see that those with the good work ethic were the ones that had a new vehicle and were healthy. The others were the 2-pack smokers and drinkers that called in sick because they were hungover and drove the big redneck gas guzzlers that they couldn’t afford the fuel for.
“You want $15 an hour? Earn it. You want a 20 percent tip? Give me great service.”
Reader James M. added his take by saying: “Yes, I think it is wise of McDonald’s to raise the hourly pay if it does not impact the company profit to the point where the company is at risk. It should increase employee loyalty and improve employee/customer relations, important to the success of the company.
“However, I am unalterably opposed to the government setting a minimum wage floor. This is an outright socialist action spending other people’s money in an employee/business relationship. There are people who will lose their jobs if minimum wage is imposed by law where a business must raise product prices to stay in business, lowering demand for their products, providing increased incentive to terminate marginal employees, and forcing some to lose their jobs because a company is forced out of business from reduced demand for more expensive products.”
Reader Bill S. also warned of potential consequences from the move, saying: “Be on the lookout for McDonald’s to sacrifice food quality to cut expenses and offset the hourly pay increases. As if the quality of the food isn’t bad enough already.”
Finally, Reader Allan noted that McDonald’s and other companies that have taken similar steps aren’t exactly acting out of altruism. His view:
“These companies are trying to short circuit the cry for a $15/hour minimum wage, NOT for benefiting employees. $10/hour is their compromise to reduce what they ultimately would pay on a federally mandated minimum wage.”
As for California going “dry,” Reader Gary said there’s a way to avoid it — but it requires political and popular willpower:
“California should turn to power and desalination plants along their Pacific coastline. Efficiencies of such plants approach 90 percent thermal utilization of fuel. But both the U.S. EPA and California EPA will not permit converting sea water to fresh water for fear of damaging marine organisms.
“Bottom line: California will lose billions in revenue due to lost sales of agriculture, jobs, investment, and loss of population — unlike the Emirates, where massive power/desalination plants have turned the desert green and increased their GDP five-fold.”
Reader G. Bishop offered a similar take, saying: “Back in the 1980s, we had multi-year drought and desalination was discussed. We have the Pacific Ocean at our front door in Southern California!
“After 15 years of red tape and environmental road blocks, a desalination plant designed by the Israelis in Carlsbad will be completed by September, producing over 54 million gallons of potable water for San Diego, 10 percent of our needs. Our water shortage has been engineered by gross mismanagement! There’s no technical reason this can’t be duplicated all along our coast.”
Thanks for weighing in on these important issues. We’ll have to see if more companies follow in McDonald’s path, especially considering the weakness in the most recent employment report. It shows our job market is downshifting after several months of improvement.
As for California, I can’t speak to the relative benefits and drawbacks of desalination without doing more research. But we deal with droughts and water issues here in Florida every few years, too.
Mother Nature always seems to balance things out eventually though (sometimes via unfortunate things like hurricanes!) But it’s a lot harder to count on that when you insist on building lush, green retirement paradises in the midst of a desert.
Anything else you’d like to add? Then don’t forget to head over to the Money and Markets website and share your comments!
|Other Developments of the Day|
There it was sitting in my email box this morning. Subject line: “See Apple Watch in action.” Headline: “Take a tour today.” Instructions on how to pre-order the new Dick Tracy-style device April 10, and a link to a series of videos that show you what it can and cannot do.
A lot is riding on whether Apple (AAPL, Weiss Ratings: A+) can deliver with its watch, or if it’ll prove to be a rare flub. We’ll know soon enough once initial sales data makes its way into the public domain!
President Obama is pushing hard to build support for the Iranian nuclear “deal” at home and abroad. But it’s still proving a hard sell to Congressional Republicans, Israel, and other critics. And let’s face it: This is a quasi-deal that will lead to even more months of tortuous negotiations, which then may or may not result in a real deal at some point down the road.
Speaking of Middle East hotspots, Yemen continued to descend further into chaos over the weekend. Hundreds of fighters and civilians have died on all sides as a result of Saudi-led bombing raids and Houthi attacks.
Baseball is back, with MLB regular-season games being played around the country for the first time in months today. Sadly, my wife’s Chicago Cubs didn’t get much going last night at Wrigley Field — a field that has a LOOONNNGGG way to go when it comes to its current renovations, by the way!
Any other stories catch your eye? Or anything you want to add on the ones mentioned here? Here’s the link for you again.
Until next time,