March 2009

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This week’s G20 summit is much anticipated by most investors. Members of the G20 are likely going to propose some big changes for the world economy, ones that will likely affect the US and almost every other industrialized nation. Japan wants to create a new IMF lending facility and China wants to see the US dollar tossed out as the world’s reserve currency. Unfortunately, this is just the tip of the iceberg when it comes to some of the potential changes and issues that could prove further divisive for many countries worldwide. The big question that many investors will have among all of this fervor and hype is how all of this will affect my portfolio?

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European and Asian markets reacted favorably initially to the news that there now exists a plan for buying up and dealing with the toxic assets that many US banks have on their balance sheets. US markets reacted well on Monday but slipped a little Tuesday. I’m wondering, given the fact that so many people are quick to discredit the US with being the world economic leader in all of this recession-related economic activity, if their sentiments are true or if the US economy is still leading the world economy, for better or worse. The US Dollar remains as the benchmark currency held in the reserves of thousands of banks worldwide. Will this soon change?

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Exports may begin to gain ground on news that the Fed is going to buy back 300 billion in long term treasuries. The market’s reaction last week was positive, but whether or not it will have a lasting impression is anybody’s guess at this time. The one sector that could really benefit from any short to mid term inflation is exports. With the price of fuel slowly but steadily climbing again, and with less money to spend abroad on imports, many countries will see the falling dollar as an excellent opportunity to buy up some US exports and get some great deals.

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The recent move by Chairman Ben Bernanke and others at the Federal Reserve to buy back three hundred billion dollars worth of long-term treasuries has had a wonderful effect on the stock market. It’s also boosted consumer and investor confidence that the economic crisis is beginning to reverse itself or has at least found its proverbial bottom. But the danger of hyperinflation moves ever closer any time more money is going to be pumped out into the streets and pockets of US citizens and others all over the world. It’s happened before, but even if hyperinflation doesn’t occur on a wide scale, investors should still know how to bulletproof their portfolios against a severe inflationary cycle.

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Currently there are millions of unemployed Americans who had a steady, dependable job this time last year. That’s not even taking into account the millions of others that are underemployed. These underemployed people could be someone with master’s degree working as a gas station attendant or at a local fast food restaurant. This economic storm is taking its toll on everyone in America and the pessimism has not let up in many places, and for good reason. With all this bad news, the good news is that the economy and the country is reorganizing itself.

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Precious Metals have always been used as a hedge, or insurance plan against poor performance in other markets. Inflation, stock market losses, and a slumping economy are all typically good for precious metals, driving demand and commodity prices higher as other investments turn sour. With the recent global recession, platinum, gold, and silver as physical holdings as well as precious metals stocks have become more and more attractive to a growing cadre of investors as the demand for luxury goods has fallen steeply in the same period.

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I have noticed two trends lately: the first is articles and news stories that trot out "In these troubled economic times..." (or a variant) as the lede. The second is people who had lots of money before the downturn, and continue to have a lot of money now, but who have grown sheepish about extravagant displays of wealth.

The first time I noticed this, it was in a blog post by start-up CEO Penelope Trunk, under the sub-heading "Being cost-conscious is cool."

"This trend is very freeing to me because my favorite dress for this winter is from Target. It is velvet but not really velvet - sort of crap, cheap velvet. And when I bought it, in September, I worried that it was over-the-top-cheap.

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