LGR Financial Newsletter
Volume I, Issue 1 (Released On January 07, 2014)
Each New Year brings both prospects for change and time for reflection – and, in terms of investing, an opportunity to think through the year ahead. Ready for 2014?
I’m a student of the market, and I’d like to share my thoughts from time to time in blog format.
I follow the following sources daily: Wall Street Journal, The Economist, Bill Cara (www.billcara.com), and two sites that follow daily market trends: www.sentimentrader.com and www.shadowstats.com
I would definitely appreciate any feedback, and if you have any specific questions or topics you want me to address, please let me know that as well.
Now on to the fun stuff…
I recently read some interesting stats in a WSJ article that came out on January 03, 2014, which was referring to the fact that the Dow (Dow Jones Industrial Average) was down 0.8% and the S&P 500 was down 0.9% on January 02, 2014 (the first trading day of the year). The article stated that “In 20 of the past 26 years, according to the WSJ Market Data Group, the Dow has moved the same direction for the year that it moved on the first day. This trend has occurred every year, in fact, since 2005.” The article went on to state that “The correlation is weaker for the S&P 500. That index has moved in the same direction as the first trading day in 14 of the past 26 years.”
I believe this correlation is more important than ever this year, because the S&P was up so much the in 2013 (up ~ 25%), and people begin the new year by selling stock to pay capital gains taxes for the previous year. As a result, I think that it would be more likely for a down year to occur after the first day of a trading year is down if the previous year showed a huge gain (as there was in 2013). This just adds more weight to my belief that it is very unlikely that 2014 will be as good to investors as 2013.
In other news, Bill Cara’s newsletter (www.billcara.com) just provided a weak outlook for the US Dollar. The dollar has been used as the main currency by foreign countries for trading oil, but that has begun to change in recent months and this could potentially lead to a weaker US Dollar in the future. Below is the segment from the newsletter…
“Step by step, countries around the world have been moving towards direct trade with each other, bypassing the US Dollar. The most important change is the end, albeit slow end, to the petrodollar.
The petrodollar is how OPEC receives money from oil sales. In simple terms; oil importing countries convert their currency to US Dollars and then purchase oil with these dollars – which is why they are called “petrodollars”. The oil exporting country then deposits the US Dollars into the western banking system. This process of using the US Dollar as the sole oil exchange currency is ending as major countries like Russia, China, India, etc. are starting to bypass the traditional petrodollar exchange by using their own currencies for middle east oil purchases.
The massive debt monetization plan called Quantitative Easing may lead to the US Dollar declining over time. OPEC sees this as increased risk in holding US Dollars and has chosen to begin to accept other currencies in order to lower their currency risk.
The decline of the petrodollar means that demand for the US Dollar will drop over time, moving price lower.”
This isn’t necessarily a new development (although Russia has been making some moves of its own recently), but it is important as it is just one reason that the US Dollar may weaken further, and potentially one day it may no longer be seen as the global reserve currency.
If you have any questions about this Issue of my Financial Newsletter please fill out the form below. I also appreciate receiving any comments you might have about what you just read, and I encourage you to send me ideas for topics that you would like to see me write about in the future. Thank you for reading!