Aaron Katsman
IsraelNewsletter.com

I posted yesterday about how a strengthening US Dollar could potentially benefit Israeli stocks that trade in the US. I was asked by some readers how come I think that the USD is poised for a rally? The answer…FIFO. FIFO is an accounting term that stands for ‘first in first out.’ With the global economy on the skids, the US was the first country to start having problems and with a vigilant Fed at the wheel, I think the US will return to normal growth in the next 6 months. After all, no recession occurred. The US has had no negative GDP growth quarters, and actually had a surprisingly good 0.9% GDP for Q1. Europe on the other hand, is just starting to show signs of a slowdown. I have heard analysts predicting a potential contraction of over 2% in European growth. That certainly will be bullish for the greenback.

I really think investors need to keep an eye on what’s happening in South East Asia. Asian stock markets like Vietnam rocked and rolled during 2006-07, unfortunately, steep market drops and a worsening economic situation may be a precursor to another Asian financial crisis like we had 11 years ago. Keep in mind that the Vietnam market has lost more than 55% during ‘08, and with inflation jumping, the currency has dropped. This isn’t just an issue in Vietnam. Countries like India, China, Philipines and Hong Kong are all in the midst of spiking inflation, and in the case of the Philipines and Thailand for example, sinking currencies. (Continue »)

Share with others: