Bloomberg reported yesterday that after weakening 20 percent in 2008, the Mexican peso fell to a record low of 14.5/U.S.$, and that RBS Greenwich Capital Markets – click here – predicts a further  4.5 percent drop by June 30. This drop is attributed to the U.S. recession and falling oil prices.

An obvious fallout from this is that anyone owning shares in companies whose principal operations are in Mexico – and a number of the mining companies in the StockResearchPortal.com company universe qualify – ought to carefully assess what this means, either positive or negative, to each of those companies.  Likely each company is being affected somewhat differently.  I suggest the quickest way to determine the affect on a given company is to call the company’s President or CFO and question them about this.  I find these people are readily available to shareholders.  Having said that, I am told by many of them they don’t get a lot of calls from individual shareholders.  I am always surprised when I am told that.  My advice – don’t hesitate to pick up the telephone.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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I follow the U.S. Trade Deficits closely.  They, along with U.S. Consumer’s using their houses as ATM’s (which I figured out in mid-2005) are the primary reasons I am bullish on gold.  For some time I have been well aware of the amounts of U.S.$ held in Treasury Bills and Treasury Bill equivalencies – almost U.S.$2 trillion.  As I understand it, China has accumulated these U.S. equivalents through the following process:  Walmart (or some other U.S. business) orders U.S.$20 million of product from a Chinese manufacturer.  On receipt of payment in U.S.$ that Chinese manufacturer trades those U.S.$ for Chinese Yuan printed by the Chinese government.  The Chinese manufacturer then pays its employees in Yuan, buys capital equipment in Yuan, and so on.  The Chinese Government retains the U.S.$ it effectively got by printing Yuan (indirectly printing U.S.$) and buys U.S. government backed Treasury Bills or other securities.

Not everyone – including Wall and Bay Streeters –focus on the quantum of $U.S. held by the Chinese government, and the possible consequences of this.  Personally, I believe China’s accumulation of U.S.$ equivalents likely is a world changing event.  This massive amount of U.S.$ will enable the China to build infrastructure, further their internal economic development, and acquire assets outside China that China considers strategic.  This in circumstances where the Chinese ideologies are different from North American ideologies.

There is a very good article, with charts, available today on Brad Setser’s blog – click here.  I strongly suggest you read Setser’s article, particularly if you are not familiar with the extent of China’s U.S.$ reserves.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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In what I consider to be a very interesting development, yesterday Todd Sullivan wrote an article titled ‘Hedge Fund to Measure Returns in Gold Rather than Currency’ in Seeking Alpha  quoting from the Financial Times – click here – that says (paraphrased) “as worries grow over governments debasing their currencies by printing money Osmium Capital Management, a $178m hedge fund manager based in Bermuda, has begun offering investors the chance to have their investment denominated in gold by ‘launching a new share class allowing investors to hold shares measured as troy ounces of the fund, rather than U.S. dollars, sterling or euros’”.

The Osmium website – click here – in part describes the workings of the fund as follows:  “An investor will be able to subscribe in GBP, EUR or USD. The investor’s subscription amount will then be converted into a number of ounces of gold and denominated as such thereafter. The Fund will hedge its exposure to the price of gold by selling gold for cash and buying gold forward on a monthly basis, in the same conceptual way as the GBP and EUR Classes are hedged to these respective currencies.  The result is that the investor will be able to hold the equivalent of a long gold position, with exposure to the performance of the price of gold and invest this gold position in the Fund, additionally gaining exposure to the underlying performance of the Fund.”

Sullivan says:  “This shows a stunning lack of confidence in currencies. It also says that the fund is anticipating inflation to rear its ugly head in a scary way.”  I think his use of the word ‘stunning’ is an overstatement, and that even if he is right that ‘the fund is anticipating inflation’ the latter would not be the only motivation the fund may have had.  In any event, if this move by Osmium (obviously on a world scale a ‘smallish’ hedge fund – although who knows if that is correct in the aftermath of market corrections to date – is followed by others, that would be one more positive factor for gold.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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Bespoke Investment Group LLC (click here) claims offer some of the most original content and intuitive thinking on the Street.  Trading range charts for ten major commodities showing two standard deviations above and below their respective 50-day moving averages are shown in charts you can find by clicking here.  There is a brief commentary on trends in these commodity prices as well.

The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. No check of data underlying articles or comments referenced herein has been made, and no responsibility is taken for them.  See Legal Disclaimer.

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