Currency Specialist Predicts Immediate Housing & Stock Market Rebound
PALM DESERT, Calif., Nov. 27 /CNW/ -- Plunging interest rates helped by a
lower U.S. dollar are about to rescue both the U.S. housing and stock markets,
says US currency specialist Mike McDonald. Not next year, but immediately.
McDonald follows the Dollar for a living and has written two books on
investing: A Strategic Guide to the Coming Roller-Coaster Market (June 2000),
and Predict market Swings with Technical Analysis (2002, Wiley & Sons). He is
currently President of Dollar Crisis and Recovery Partners, LP.
McDonald notes that since June, one year U.S. Treasury bill rates have
fallen from 5% to an astonishingly low 3%, while 10-year Treasury rates (to
which 30-year mortgages are indexed) have declined from 5.2% to 4%, with most
of the decline happening in the last month.
McDonald's thesis is that the recent plunge in interest rates has, almost
overnight, changed everything. "The doomsday scenario painted by Wall Street
over subprime mortgages and housing is suddenly way overblown."
WHY IS THIS HAPPENING?
The Fed controls short-term interest rates; longer-term rates are at the
mercy of foreign investors who are the primary buyers of U.S. Treasury bonds
and bills. Japan and China combined own close to 60% of the US Treasury debt.
"The lower U.S. Dollar finally brought in foreign investors looking for
bargains," says Mr. McDonald. "The worry that the Dollar could free-fall does
not seem to worry foreign investors today. I agree. In fact I'm expecting a
higher dollar and lower rates. Right now I believe the dollar is poised for a
significant long term rally."
"With much lower interest rates, many people with variable mortgages will
find they can afford the new re-set payments after all. Foreclosures should
drop dramatically, the housing glut should level off, and housing prices will
then rise. Lower rates should also increase the number of qualified homebuyers
by as much as 40%," says McDonald.
McDonald concludes, "It's not as bad as they say. Many companies -- such
as HSBC, GM, Merrill Lynch, and Citigroup -- used default assumptions based on
higher interest rates to calculate cash flow yields and wrote off billions in
mortgage-backed CDO assets. This could be way off the mark. These CDOs now
look like bargains to me, and cash flows from CDOs should come in much higher
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For further information:
For further information: Erin Gilhuly of Dollar Crisis and Recovery
Partners, +1-760-641-0739 Web Site: http://www.glengarryadvisors.com