According to our latest circulation numbers, roughly 65 percent of the subscribers to this newsletter (and to Senior Market Advisor in its print form) have a securities license and perhaps I don’t address your particular needs as often as I should.
I received a pretty interesting article from Mark Dodson, CFA, of Brentwood, Tenn.-based Hays Advisory, LLC., late last week concerning the global economy and the U.S. dollar versus the euro and wanted to share some highlights from it so you can address questions your clients may have for you regarding those topics.
Q: What should be done about the European mess?
Dodson: Just a few years ago we were being asked this question about the U.S. dollar, to which we said, the euro is the one that you need to worry about, not the dollar. Now that it is the euro we are all worrying about, what can be done? The first answer to us seems to be the most obvious-provide more liquidity. In spite of what you may read, monetary policy grew too tight in the Euroland in March and April of this year and is too tight today.
Today, the euro is overvalued against the dollar (about 20 percent by our estimates), and monetary policy needs to ease substantially. The value of the euro needs to be brought down if leaders are serious about wanting to save that currency. Policymakers can have those structural discussions about the euro, like fiscal integration, but right now that’s a little like worrying about how to rebuild your engine while you are riding on four flat tires. Buying tires (providing more liquidity) seems like the no-brainer here. If the ECB (European Central Bank) wants to save the euro, it is going to have to hold its collective nose and buy the sovereign debt that others don’t want, plain and simple.