Like the band "Boston" sings..."It's more than a feeling"

May 5, 2011 - PRLog -- The biggest shocker to me right now is the continued drop in the US Dollar index. This means, basically, that the US Dollar is continuing to weaken against the Euro. When most people talk about the US Dollar crashes they are referring to purchasing power or price inflation (commodities rising). However, I thought that in July of 2008 the US Dollar had reached its bottom when compared to the Euro. However, as of May 4th the US Dollar Index is down 6.24% from its low on July 11, 2008!

Maybe this is the fulfillment of the prophecy in Daniel, where many interpret the iron legs to mean that Europe will again become a world super force. It is just amazing how the herd and people’s emotions can swing markets so far in 1 direction, and then of course, the market snaps back. For example, oil rose to $148 a barrel during the summer of 2008, and then snapped back to $30/barrel; down 79%. The NASDAQ rose all the way to 5,046 on 3/9/2000, then it crashed back down to 1,163 on 10/10/2002; down 77%. Home prices in Miami, Florida rose to an average of $360,000 in March of 2007 and plummeted all the way down to an average price of $169,000 in February of 2011; down 53%.

Most any person will tell you that we humans are fantastically emotional beings. However, many of those same people that will admit this have a hard time taking that fact and confessing that our human emotions greatly affect the price movement of everything. How else can one reasonably explain such extreme volatility in values?

Fortunately for my clients, I don’t place trades or make moves based on my own emotions or theirs! Back on January 4, 2011, I took a position against the US Dollar Index by purchasing foreign currencies. These currencies have risen about 8.26% over the last 120 days. But I would think that at some point the US Dollar would begin to appreciate against the Euro. Right now, however, people are so down on the US Dollar.

What about interest rates? Can you believe that interest rates have been trending down since February 10th of this year? Also, interest rates are down for the year. Here again, at the end of the 4th quarter of 2010 many authorities were talking about the great exit from bonds (means interest rates go up). Articles are still being written about the great bond bubble but interest rates are down this year (means bonds prices are up).

On January 26th, I had one of my clients leave me because I bought the 20 year US Treasury bond on January 25th. He told me that he had no confidence in the US government and that interest rates were going up and that I did not know what I was doing, and he couldn’t let someone like me manage his funds. Now, of course, we are still holding our position in the 20 year US government bond and it is up 1.97% over our 99 day holding period.

Like I have written many times before in The Entrusted Steward; I don’t care what investment I am using for my client as long as it goes up. Also, I am using a non-emotional investment strategy. So after the 4th quarter of 2010, when interest rates went up and bonds crashed it was very difficult for me to make this purchase for my clients because it didn’t “feel” right. But I am glad I stuck with my trading plan because now my clients are sitting on a nice profit that has also provided them with a non-correlated asset class (long term government bonds).

The Bible tells us in Ecclesiastes 11:2, in no uncertain terms, that no one knows the future. Yet, we read so many articles with oodles of fundamental information telling us where the markets are going. I have learned that people will find fundamentals to support their belief about the direction of a particular asset class (precious metals, foreign currencies, stocks, real estate, commodities, bonds, etc.). But for every fundamental you can find to make a case for an asset class going up, there is as fundamental that points to it going down as well.

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Eleven Two Fund Management is a Registered Investment Advisor (RIA) located in Marietta, GA. We are proud to be working with Christian Individuals, small business owners, and Families in over 16 states.