By Gary Scott

Merri and I have returned from Ecuador and are enjoying the glorious Blue Ridge dawns. The morning mountain mists shrouded the forests and the tops of the mountains.

Earlier three blackbirds grazed easily at our door step, along side my John Deere and a wild turkey strolled by the pond in the distance. I was reminded of the great Bob Marley song, “Three Little Birds” and its words “No need to worry cause every little thing’s gonna be alright”. Here they are “pickin corn”!

But dollar wise is everything “gonna be alright”?

We have a variety of neighbors beyond the three crows who regularly stop by. There are four deer, one big, dark bobcat, some bears, squirrels, possums and lots of raccoons.

This is wonderful except all these beautiful animals keep trying to eat one other! The Bobcat regrettably reduced our goose population this winter. Papa, Mamma and Baby Bear broke into the chicken pen, not to get the chickens but to eat their feed. This left the path wide open for our raccoon friends who did feast on our beloved rooster.

That’s life on the farm….with risks. That’s the law of the farm.

While enjoying the dawn and thinking of risks and the law of the farm an article published in the Sydney Sunday Times was sent to me from a reader down under.

The article began: “Dollar starts the big slide against major currencies”

By DAVID SMITH, ECONOMICS EDITOR

“The dollar has embarked on a big decline that will see it fall against all leading currencies, according to analysts.

“The plunge is being prompted by America’s $800 billion (£438 billion) current-account deficit, they say.

“The dollar has been under pressure following last weekend’s meeting of G7 finance ministers and central bankers, which emphasised “global imbalances” and said currencies should reflect economic fundamentals. Then China raised its key interest rate to 5.85%, its first hike for months, and Ben Bernanke, the new Federal Reserve chairman, hinted that American rates would pause at 5% after a rise in May.

“Analysts say that without interest-rate support, the dollar will be weighed down heavily by America’s imbalances.

‘I think this is it,’ said Tony Norfield, global head of currency strategy at ABN Amro. ‘The dollar has been supported by high yields but markets are saying that is no longer enough. The question for policymakers is going to be how to manage the dollar’s decline. It won’t be a one-way street but the fall is likely to be biggest against Asian currencies.’

“The euro has already risen to an 11-month high of more than $1.26, while the dollar is at a three-month low of 113.70 against the yen. The Canadian dollar, known by traders as the ‘loonie’, rose to a 28-year high on Friday, boosted by a hike in Canadian interest rates.”

What is our currency risk?

Let me begin by being honest, my portfolio currently has a pile of US dollars from three property sales. I have not been able to decide what to do. It’s not good for me to push when this happens, a peculiar quirk that must drive my advisors crazy. They give advice and nothing happens. Experience has shown that waiting is sometimes a virtue for me. Something just right may be ready to pop up.

This does not mean others should delay getting out of the greenback. Let’s take a look this week at different reasons why a currency might rise or fall and see how the US dollar fares.

Since the article above mentions the current account deficit, let’s look at this first. The current account deficit is the trade balance after reinvestments. In other words, take all the things a country buys abroad, subtract everything it sells abroad. Then subtract (or add) investments from other countries and investments out. This gives you the current account.

The US had a trade deficit of $798 billion trade deficit in the last 12 months. This means America imported that much more than it exported. It also had a record $804.9 billion current account deficit in the same period. This means that investors and businesses pulled about 6 billion dollars more out of the US than they put in.

This is a huge deficit, but this is not the only number to consider. One should view the size of the deficit or balance in light of the size of the economy. In terms of GNP, the US deficit is projected to be -6.8% of GNP this year. This is still horrible but not the worst in the world. Spain has a projected deficit of -7.3% of GNP (though protected in the euro block). Australia is in bad current account shape as well with a projected -5% of GNP current account deficit.

Germany looks good with a 113 billion current account surplus and a projected +3.9% of GNP surplus in 2006. However Germany has no solo currency and is dragged down by Spain and other laggards in the Euro block. The euro as a whole has a $40 billion deficit projected to account for a -0.3% of GNP this year.

Here are the current accounts in dollars and projections of % of GNP from best to worst.

This initial review suggests that the best major market currencies to invest in now are the Swiss franc, Swedish kroner, Japan yen, Danish kroner and Canadian dollar. However do not jump in based just on this. This is just the dawning of our currency review. There are many other factors to consider! We will look at more parameters that affect currencies tomorrow.

Learn how to cash in on distorted words, contrasts and trends. Join Merri, Thomas Fischer of Jyske Bank and me at our next International Business and Investing Made EZ Course in North Carolina, Friday, Saturday and Sunday, May 26, 27, 28. Review which currencies may be strong in the year ahead. Do not delay we have only two spaces left! DETAILS (PS....The next course in North Carolina, September 15, 16, 17. Friday, Saturday and Sunday. Sign up for September now!  We are full for May.    www.garyascott.com/catalog/ibeznc.html  (Go to this sign up and type in the Comments Section for Sept.)

On the subject of early mornings and dawn, here is a photo of the dawn at Cotacachi Cathedral (66 steps from El Meson) taken by delegate and friend, Jim Humphrey of Ann Arbor.

Here is a note from another delegate telling us what he thought about his stay at El Meson.

“The combination of the Ecuadorian environment, with that of two wonderful people that were lucky enough, or ordained to be, soul mates, with the intelligence to make their own fortunes, and then find a way to help others to do the same and also help so many unfortunate people to better themselves, has followed me home and to Jupiter, FL, and I am feeling great and breathing a much easier in this sea level environment.

“Thank you so many times for putting up with an ill old soldier and making him well again, not only physically, but mentally as well. I wish you and Gary could put up a place for our Congress to come down before big votes, and remind them of what is really important. They forget so easily up there, where they stay too long, of course. We need fresh people there, much more often. Enough of that! We don't need to deal with that now.

“The last items to thank you for, are; one--the nice folks you attract to your seminars and two--and very important,--The Wonderful Staff you have working at the "El Meson de las Flores." Please tell them, I have traveled to 63 countries in this world, and THEY ARE THE BEST!!

“Please let me know if I can be off assistance to you and your projects. I'll let you know if the coffee deal makes any grounds, so to speak.

“Merri and Gary Scott, thank you a hundred times and more, I hope to see you again in the future. John”

Until next message, may all your dawns be bright!

Gary

P.S. Enjoy some R&R with the people of El Meson! DETAILS

P.P.S. Join Merri and me for a week of Quantum Learning and learning Super Spanish at El Meson. DETAILS