- If the Fed lowers rates, as most everyone expects, and the U.S. dollar begins to soften against most currencies, then commodities are likely to do well. Those commodities will cost more in U.S. dollar terms. At present, many commodities are doing well, such as oil, gold, silver, and wheat.
- Oil is certainly interesting. Today it touched an intraday high of greater than $80 per barrel (Wall Street Journal subscription required). If you look at the oil futures prices on the NYMEX Exchange, the future price for oil for December 2015 is $69.93. If the U.S. dollar depreciates further—even if in the short term—imagine what might happen to the December 2015 futures price. And, if the economy appears that it is decelerating, then the markets will likely expect oil prices to fall and thus the future prices will fall too. If this situation plays out, this might be a terrific opportunity to purchase oil futures or calls on oil futures. When I think of oil, I ask myself, Where will the world find new supplies of oil as existing supplies continue to dwindle and as other economies continue to develop?
- I note that the iShares Silver Trust (SLV) now has over 139 million ounces in trust, an approximate increase of 40% from last year's value. To put this increase into perspective, my favorite silver producer Pan American Silver Corp.'s (PAAS) annual production, according to its 2006 Annual Information Form, was approximately 13 million ounces.
- Like everyone else, I am looking forward to Bernanke's decision next Tuesday. I am looking even more forward to the market's reaction to the rate cuts.
Just as a reminder, you must do your own research and your own investment decisions. I am not recommending any investment actions.
The softening dollar may be somewhat priced in, though. Not like lowering rates next week is something new and out of the blue.
Bernanke should be fun next week. Something to watch (and parse).
Agreed, a softening dollar might be priced in. Investors/speculators are groping around in the dark to figure out how much of a cut is necessary and does any rate cut, regardless of the amount, make any difference. Added to that, if the U.S. sneezes, the rest of the world catch a cold?
And then we have Greenspan's 60 Minutes interview on Sunday where he promotes his new book. Does he say anything new or novel that will influence the markets on Monday and Tuesday leading into Bernanke's statement?
This is just a long winded explanation to say that I am waiting for the market's reaction before reaching any conclusions.