A few weeks ago, Treasury Secretary Geithner had to go to China to assure our largest creditor that their investment in the U.S. dollar was safe. Now he’s off to Saudi Arabia and United Arab Emirates for another round of "strong dollar" propaganda.
Of course, it’s not an easy task to convince foreign governments that the U.S. wants a strong dollar when interest rates are at zero and we’re selling tens of billions in Treasury bills virtually every week. You may recall Geithner’s assurances elicited laughter from a group of Chinese college students when he made the strong dollar pledge there.
If college students know the score, you can bet everyone else does, too. But Treasury auctions have been met with plenty of demand, and that’s a good thing.
*****Fed Chief Bernanke is expected to reveal to Congress just how he plans to reverse his stimulative monetary policy next week. The Fed has expanded the money supply by about $1 trillion, cut rates to zero and doubled the assets on its balance sheet.
In normal times, this would be highly inflationary. But these aren’t normal times. Were it not for the Fed’s action, the U.S. economy would be broken even more than it already is.
Now, normal times will return. And how the Fed plans to reel in liquidity when the economy starts to grow again is critical. The potential for runaway inflation is real, and the Fed will have to be just as diligent at fighting inflation as it was fighting deflation.
*****Goldman Sachs (NYSE:GS) received an upgrade from the very same banking analyst that predicted collapse of mortgage-backed securities, Meredith Whitney.
Upgrading Goldman is easy. The bank is practically a subsidiary of the U.S. government. But the timing is interesting, given that Goldman reports earnings before the bell tomorrow.
And speaking of earnings, this is a big week for some important companies. In addition to Goldman, we get Intel (Nasdaq:INTC) after the bell tomorrow. Thursday, we’ll hear from JP Morgan (NYSE:JPM), Google (Nasdaq:GOOG) and IBM (NYSE:IBM). Then Friday, we get General Electric (NYSE:GE), Bank of America (NYSE:BAC).
Tech and financials – the anchors for the U.S. economy will be reporting this week. Investors will be watching these early earnings reports closely. Much of the rally of the past few months can be attributed to investors’ faith in companies meeting Q2 earnings, even if expectations were substantially lowered. Any bad news from these bellwether companies and the market could turn. We’ll be watching closely.
*****As if earnings weren’t enough, there’s a full slate of economic data coming out this week, too. Tuesday, it’s the Producer Price Index (PPI) along with retail sales and business inventories.
Wednesday, we get the Consumer Price Index (CPI), the Empire Manufacturing Survey from New York state, capacity utilization, industrial production, crude inventories and the minutes from the last FOMC meeting.
Thursday, it’s initial unemployment claims and the Philadelphia Fed.
And finally, on Friday, we get building permits and housing starts for June.
Whew! That’s going to be a lot of data to review.
*****On January 15, my Top Stock Insights advisory service released its Predictions 2009 special issue. This issue was our blueprint for profits with mid- and large-cap stocks as we headed into the new year.
In that issue, I outlined the case for oil, gold, commodities and biotech/healthcare stocks. And we took 51% profits on an oil stock, 25% on a gold stock, another 25% on a commodity stock and we’re still holding three biotech/healthcare double-digit winners in the portfolio.
In other words, our expectations for the year led my readers to some nice gains this year, and there’s more to come…
Now, I’m all set to release an update to that special Predictions issue that will get us through the rest of this year with more solid gains. It comes out on Wednesday, and if you’d like to get my blueprint for profits for the rest of 2009, please click here. Or go to topstockinsights.com.
*****Also, if you missed TradeMaster Daily Stock Alerts technical analyst Jason Cimpl’s weekly video chart analysis, here’s that link again.