Guest post by Melissa Tamura
Nowadays, many investors have become wary of the dollar, with all of the money printing that has gone on stateside in the last two years. The money supply was grown at a rate of 300%, and this assuredly spells inflation disaster and currency devaluation troubles in the near to medium term for America. Other investors who used to trumpet the arrival and rise of the Euro as the answer to the increasing dollar dilemma have become disenchanted as they watched Greece burn down and then the infectious contagion spread first to Ireland, Portugal, and now even Spain and possibly Italy. Where is an investor looking for a secure currency in which to store his or her wealth to turn today? One place for investors who are looking for a strong alternative foreign currency to keep their money safe in is Israel and the Israeli Shekel. This article discussed five reasons why the person of means ought to sink a portion of his or her investment dollars or Euros into Israeli Shekels.
Reason #1 – Respected Analyst Recommendations
Less than a year ago, Barclays Capital forecast a rapid conclusion to the relatively shallow recession in Israel, along with a fast track back to reasonably good growth of 2.9 percent in 2010. Remember that the Israeli economy came to the recession party late in the game and appeared to be leaving it early. This has now come to pass, as Israel recently announced better than expected growth of her her higher technology exports, as well as her overall economy.
Reason #2 – The Alternative Energy Play Angle
Whether you personally agree with him or not, President Obama’s drive for sources of alternative energy is an enormous boon for Israel. Israel remains among the biggest worldwide participants of water and cleantech technologies. As the global recovery continues and picks up steam, the Israeli high tech sector, whether small or mid size companies, should have a very strong 2010 year.
Reason # 3 – Rapidly Growing Israeli Economy and Dropping Unemployment
May 30th saw the nearly year long high of the Israeli Shekel against the dollar. This followed an announcement that the Israeli whole economy grew at a quicker pace than economists had predicted, along with word that her unemployment rate decreased to an eleven year low (contrast that with America’s near double digit rate). Israel’s real economy grew at an annualized rate of 5.4 percent for the first quarter, against the Bloomberg economist survey which called for 4.2%. Unemployment in fact decreased to 6.3%, down from 6.7% in the final quarter of 2007 and from 7.8% in the same quarter of last year.
Reason # 4 – Bank of Israel Rate Raising Game
May saw the Bank of Israel raise her principal interest rates by a quarter percentage point up to 3.5%, in order to fight inflation. Higher interest rates are nearly always a sign that a currency will rise in the near future, as investors scramble to purchase more bonds from countries paying more attractive interest rates. Currently the rate now stands at 4%. Contrast that to a practically zero percent interest rate in the U.S., and a less than one percent rate in the Eurozone. All else being equal, whose bonds would you prefer to buy in these scenarios? Naturally, the much higher yielding ones.
Reason # 5 – Diminishing Israeli Money Supply
Unlike practically every other modern and industrialized country since the financial crisis erupted in 2008, Israel has not run to town on a wild and gleeful money printing spree, like the U.S., Great Britain, and now even the European Central Bank have done. The Israeli Central Bank recently claimed that Israel’s M1 money supply, comprising corporate and consumer checking accounts and cash, dropped 1.1% Remember that this number compares to a money supply increase in dollars of more than 300% over the last two plus years. Investors’ money is usually more secure in a currency which is not simply inflating its way to infinity, as are the U.S. and Great Britain, to name a few errant nations.
When she’s not watching the Forex Markets, Melissa Tamura writes about higher education and distance learning for the Zen College Life online degree directory. She most recently wrote about the best online colleges.
Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.