Fed rate cuts mean weaker U.S. dollar



Jack Crooks takes a closer look at the dollar and how the rate cuts affect it. Mr. Crooks looks further into the relationship between the falling dollar and the Federal Reserve.

It's hard to believe that the greenback could get any worse off than it already is, but the Federal Reserve seems dead set on doing everything in its power to punish the buck even more. Witness the Fed's latest actions:

When stock markets around the world swooned, Bernanke and company stepped in and unexpectedly blasted a full 75 basis points off both the Fed funds and the discount rates. On Wednesday, January 30, the Fed succumbed to market pressures and officially declared war on the dollar with another 50-basis-point cut.

The Fed says its rate cuts are in anticipation of sustained economic weakness. Interestingly enough, the emergency cut came without new economic data. It could be that they were using excessive force to pre-empt significant stock markets losses with that one. However, there's no doubt that the U.S. economy is facing severe challenges right now: A housing recession, the subprime mortgage crisis, tighter credit conditions, severe blow ups on corporate balance sheets and anemic GDP figures.

Some of the latest signs:

- The rate of homeownership declined substantially in the fourth quarter of 2007. Vacancies among homes for sale are surging while house prices and sales of new and existing homes continue to drop.

- The U.S. posted GDP growth of just 0.6% in the fourth quarter. That was a huge disappointment. And the International Monetary Fund now estimates 2008 global growth at 4.1%, down from 4.4% in 2007.

- Expectations for corporate earnings are looking grim. Year-over-year earnings for S&P 500 constituents are expected to drop 20.5% from the fourth quarter of 2007.

- Balance sheets of financial institutions across the globe are still full of bad debt thanks to scores of complex derivatives.

- There are major questions about the future of the U.S.'s two largest bond insurers.

"And then, on January 31, more bad news was released: Payrolls declined in January for the first time since 2003. The report also noted downward revisions to the final months of 2007, strengthening the case for a U.S. recession," Mr. Crooks states.

To read this issue online, please visit:

http://www.moneyandmarkets.com/Issues.aspxNewsletterEntryId=1413

About JACK CROOKS & MONEY AND MARKETS     

John (Jack) Crooks is the founder and president of Black Swan Capital, an independent advisory firm specializing in foreign exchange and currency markets investing for retail and institutional clients. A seasoned financial advisory with nearly 20 years of investment experience, Mr. Crooks uses both quantitative and qualitative approaches to determine the fundamental driving force(s) behind the movement of the currency, capital, and commodities markets. He is the editor of Weiss Research's latest investment offerings, World Currency Alert and World Currency Options, which were launched in August 2007.

Mr. Crooks also founded Ross International Asset Management, a discretionary money management firm specializing in global stock, bond, and currency asset management for retail clients. Previously, he was general manager of Plexus Trading, where he specialized in currency futures and commodities trading. During his successful career, Mr. Crooks served as chief currency and futures strategist of M2 Futures Inc., an investment boutique headquartered in Chicago, as well as vice president of Global Strategic Research for an international investment boutique, where he was responsible for providing daily advice and global strategy analysis.

Prior to entering the investment arena, Mr. Crooks held various corporate finance positions. He has written extensively on the subject of global currencies and international economics and has been published in Asian Times, Futures Magazine, Barron's, Bloomberg, Dow Jones Newswire, and across many financial websites. He has also appeared on Bloomberg TV and CNBC.

Mr. Crooks holds a bachelor's degree in finance from Florida State University and a master's in business administration from the University of North Texas.

Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.





Fed rate cuts mean weaker U.S. dollar