Musings (Jul 2017)

This is the time of the month that results in added scrutiny on various levels.  Not so much on the strategy, but on events that have the ability to impact my investments.  With July going to the wire with seven dividends being paid Monday.  It will likely be Wednesday when I get the final results and my performance will probably hinge on the exchange rate.  Which triggered my random thought process – which at times is scary.

Observation #1

  • The USD has been weakening as I reflected on in a prior post.  Japan faced a mini-crisis vis-à-vis North Korea on Friday.  Previously, in such times, the dollar would strengthen while the Yen weakened.  This time, it was the Euro that strengthened versus the Yen.  

Observation #2

  • With a weaker USD, gas prices have pretty much increased in inverse tandem as world oil is priced in USD (reserve currency, etc.)  Although the weaker dollar should be good for exports, how long until inflation begins its’ ascent?

Observation #3

  • Several companies have reported earnings that missed on revenue forecasts yet beat on profits.  While I don’t place significant value on analyst’s opinions, it’s telling that if this trend continues, profits will be next to suffer.
  • This I expected from regional banks which was why I anticipated a pickup in M&A activity going into the last half of the year.

Observation #4

  • The Swiss observed that the Franc may be overvalued.  Could this be a precursor to another devaluation?  If so, to what impact on the USD?

These are some of the reasons why I chose to modify my strategy earlier this month.  Not to mention the potential political impacts – or lack thereof.  Perhaps a clear US direction will be established enabling us little guys to try to navigate choppy waters.

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