Dollars Make Pennies The Rude Awakening
Laguna Beach, California
Wednesday, December 27, 2006 - Taking a look back over paper dollars vs. metals this year,
- Wishing for more dollars…and even more pennies,
- The only tow investments you need for this year, 6 days left to get into the Reserve and plenty more…
Eric Fry, wishing he owned more devaluing dollars, reports… On Christmas morning, each of your editor's three children received a crisp $100 bill from their grandparents. Upon finding this unexpected treasure, 8-year old Ethan was stunned and speechless. His eyes widened, his jaw dropped…and he just stared at the large bill. Finally, he managed a slow and distinct, "Oh my gosh!" Then he started screaming toward his brother and sister, "You guys! You guys! Look at this! Did you get one too?" The other two kids rummaged through their gifts until locating their $100 bills. Soon all three kids were jumping around like crazed monkeys…or like children on Christmas morning. None of the three kids had ever seen a $100 bill before. And they had certainly never seen a $100 bill that belonged to THEM. $100 isn't as much money as it used to be. But still somehow, a $100 bill possesses the power to dazzle and amaze. This famous banknote still symbolizes the dollar's historic strength…even as the dollar's strength is becoming little more than symbolic. In the Rude Awakening "classique" column below, which first appeared on May 6, 2006, we noted the surprising divergence between the value of a dollar and the value of a penny. The dollar's value was falling, we observed, while the penny's value was climbing. We presented this observation "to underscore the obvious: A small piece of imprinted paper contains less real-world value than a small piece of copper or zinc." "Although we continue to anticipate a harrowing, short-term sell-off very soon in copper, crude oil and a few other commodities," we warned, "we also continue to anticipate a harrowing long-term sell-off in the U.S. dollar." Since issuing this warning, the price of copper has slumped more than 20%. But more to the point, the U.S. dollar has also continued sliding, bringing its year-to-date drop against the euro to nearly 10%. The greenback has fared even worse against copper, gold and most other commodities. One U.S. dollar buys 21% less gold than it did one year ago, 32% less copper and 80% less corn. Past will be prologue, we fear. Which is why this Rude Awakening column from the recent past might serve as a worthwhile prologue to the dollar's likely fate in 2007. --- 6 Days Left ---
Want to Get Your Favorite Agora Newsletter for Free for Life? 6 Days Left to get into the Reserve! Your private invitation is about to expire on January 2, 2007, so act now so you can grab each and every one ofAgora Financial's profitable picks for as long as you want… Read on to learn more… ---------------------------- Dollars Make Pennies
By Eric J. Fry The value of a U.S. dollar has tumbled 7% so far this year,but the value of a penny has soared 70%. A couple of recentEuropean news stories shed some light on this monetarymystery…and on why the value of dollars and pennies mightcontinue to diverge. A Reuters news story reports: "Sweden's central bank becamethe first among the developed economies to announce a majorreserves shift, saying it had raised its euro holdings to50 percent of its $20 billion-plus reserves from 37 percentand cut dollar holdings to 20 percent from 37 percent." Meanwhile, down in France, Agence Presse reports: "A hold-up gang in northern France has been targeting shipments ofcopper and nickel, hoping to profit as the metals' priceshit record highs." While the Swedes sell dollars and the French steal copper,much of the rest of the world is engaging in a similar sortof arbitrage. A growing number of investors - bothgovernmental and private - are realizing that the supply ofdollars is limitless, while the supply of copper islimited, as is the supply of nickel and zinc and naturalgas and crude oil. It is perhaps no accident, therefore,that the dollar slumped to a new one-year lows thismorning, while copper and zinc are soaring to new all-timehighs…Gold, for the record, is hitting fresh 26-yearhighs. 
Although we continue to anticipate a harrowing, short-term sell-off very soon in copper, crude oil and a few other commodities, we also continue to anticipate a harrowing long-term sell-off in the U.S. dollar. Much of the world, apparently, is embracing a similar viewpoint. The central bank of Qatar might not be a trend-setter, but like the Riksbank of Sweden, it is clearly in the vanguard of the shift away from dollars. Qatar's central bank recently disclosed that it has been buying euros, and intends to continue doing so until the bank's euro holdings make up 40 percent of its $4.5-billion reserves. Several other central bankers and financial big-wigs are also kicking the dollar while it is down. Last week, Russian Finance Minister, Alexei Kudrin, questioned the dollar's merit as the world's "absolute" reserve currency, given the size of the U.S. trade deficit. Therefore, Russia's $61 billion oil stabilization fund is beginning to invest in euro-denominated bonds. "The dollar's dominance of all currency reserves… is basically coming to its conclusion," asserts David Keeble, head of fixed income strategy at Calyon, "and ultimately this puts a lot of pressure on the U.S, because of its very large current account deficit which has until now been supported mostly by central bank buying." But while central banks shed dollars, many private investors are buying - or stealing - hard assets. "Posing as police officers," France's Agence Presse reports, "a dozen armed men broke into a metal recycling plant in the northeastern town of Reims last week, taking the director and his staff hostage. The gang ordered a crane operator to fill two open-backed trucks with copper scrap, before making off with the booty -- 40 tonnes of metal worth some 200,000 euros (250,000 dollars). "Four thieves -- also posing as police -- commandeered trucks carrying sheets of nickel near the northern city of Le Havre, once in January and again in March, taking the drivers captive and releasing them in the Paris area. Investigators believe the thieves were drawn by the soaring prices currently fetched by both metals." We would concur with the expert conclusions of the investigating gendarmes. And we would also urge the thieves to take up licit forms of base metal exploitation. The thieves may not realize that they could simply buy pre-1983 U.S. pennies, melt them down and book a 140% gross profit. That's because each of these older pennies contains about 3 grams of copper and about .1 grams of zinc. Current metallic value: 2.4 cents per penny. Even newly minted pennies, which contain almost no copper whatsoever, are rapidly approaching metallic parity, thanks to the soaring price of zinc. Post-1983 pennies contain 97.6% zinc and 2.4% copper. Current metallic value: .89 cents per penny. We present this illustration merely to underscore the obvious: A small piece of imprinted paper contains less real-world value than a small piece of copper or zinc. Furthermore, a U.S. dollar is a poor conductor of electricity and combusts near an open flame. It contains no measurable quantity of any element on the Periodic Table; nor any resource whatsoever that could contribute to any industrial application. Rather, a dollar contains little more than a politician's IOU. A U.S. Penny, on the other hand, contains sizeable amounts of copper and zinc. So much so that its metal content exceeds its stated monetary value. The same nation that issues both dollars and pennies is the same nation that spends more than it earns, that imports more than it exports and that relies upon massive foreign borrowing to sustain its bizarre breed of prosperity. In such a world, it's a darn shame that the dollar contains less intrinsic value than a penny. Joel's Note: A darn shame? Yes. Bad for your investments? Maybe. To learn about the only two investments you will need for 2007, despite which way the dollar heads, we offer this year end report from the man that called both the dollar and the housing crash. Protect your investments right here.
The Only Two Investments You Need For 2007 --- Free Rude Housing Report --- What the Numbers Tell Us… Existing home sales data confirm the fact that the housing boom-boom is going bust-bust. Sales of existing homes fell 11.2% from a year earlier, while the absolute number of homes for sale jumped to a new record. Based on the current rate of sales, a 7.3-month supply of homes awaits buyers, the most in 13 years. Net-net, the housing market does not appear to be heading for the "soft landing" that Ben Bernanke says he expects, but rather, the crash landing that many of us fear. Click Here to read the entire FREE report. | 
