May 8, 2007 by Addison Wiggin & Ian Mathias

• No faith in the dollar? 5 currencies that are set to leave the greenback in the dust
• Consumers feel the sting of the housing bubble... and charge it on their MasterCard!
• "Agflation!" heading straight for your wallet...
• Largest crop ever ... and the world's dumbest idea
• Where to find treasure when the market gets way overvalued..

The dollar fell yesterday against a slew of foreign currencies, most notably the yen. Friday's weak jobs report has currency traders looking for the Fed to try to heat things up again... look for a rate cut sometime in '07. Their next meeting is tomorrow.

The dollar is down 3% from this time last year. Last week, the Fed dollar index fell to its lowest since inception in 1971.
 
"The list of currencies that could benefit from a falling dollar is long," comments Chuck Butler. "The list is topped by the euro. Then followed by the usual suspects with current account surpluses... Norway, Sweden, Switzerland and Asian currencies."

The currencies that enjoy "rate differentials" and will likely see them increase this week are the Australian and New Zealand dollars and the pound sterling.

The almighty consumer continues to fuel the U.S. economy. Consumer credit ballooned by $13.5 billion in March -- $8 billion more than in February -- to a whopping $2.4 trillion dollars.  Borrowing is now rising at an annualized 7% clip."

Why? Blame the housing bubble. Homebuyers can no longer count on the rising value of their homes to keep up their spending. They're turning to credit cards to keep up with the Joneses.

Last week, MasterCard reported a 70% jump in profits for the first quarter of 2007. The 5 is in Los Angeles this week, working diligently on our documentary on U.S. debt... MUCH more to come on this subject.

The housing bust will last for "quite a while," Warren Buffett said on Saturday. In a five-hour Q&A session, 27,000 investors picked the brains of two very famous billionaires -- Warren Buffett and Charlie Munger -- at Berkshire Hathaway's annual meeting. The 5's Chris Mayer and Dan Amoss were on the scene. Here are some highlights:

It will be years before housing rebounds, suggested the Sage. What's more, Mr. Buffett no longer expects Berkshire to return 20% or more each year to its shareholders -- as it has since Kennedy was president. The company has simply grown too large to deliver the kind of returns most longtime shareholders have come to expect.

Advice on investing: "Read everything you can... after that, you have to jump in the water." Buffett said the difference between investing with play money and investing with real money is like the difference between reading a romance novel and... well... you know.

Best quote of the day? Charlie Munger: "The idea of running cars on corn has got to be the dumbest idea I've ever heard." The 5 officially concurs.

On Friday, the Agricultural Ministry of Brazil quietly announced that it expects to produce 5.34 billion gallons of ethanol in 2007. That's the most ethanol ever produced in a year... a 13% rise from 2006.

"The corn situation will get worse, indeed, if these rains persist," our commodities guru told The 5 in an e-mail yesterday. "The ethanol dream of a cornfield on every block may be wilting as we speak." Corn "emergence rates" -- when the corn first pops out of the ground -- are down at least 10% from last year.

Wet weather has delayed planting to the extent that farmers are now faced with a critical decision. They must now either stick with corn or change plans at the last minute to a crop with a later growing cycle. Either way, Kevin Kerr says, corn prices are goin' up!

But corn's not the only victim of "agflation" this year. Current conditions have set the stage for a worldwide food shortage. Australian crops are likely to triple after a heated summer. Feed costs are driving anything involving cows up... especially dairy products.

"This isn't bad for companies..." says Kevin, "it's bad for the consumers. Big Ag will have no trouble passing on these costs to the end-user."

Unless you've been living under a rock, you know the Dow has officially logged its longest bull market in history.

"It's becoming increasingly difficult to find anything that's not overbought or just a complete mess," comments Greg "Gunner" Guenthner, our penny stock enthusiast. "But there is one sector to look at during this 'boom' that could yield smaller stocks with decent valuations: tech stocks."

"Right now is the perfect time to find some quality companies that have fallen out of favor with the Street," Gunner says. Fickle small-cap traders have left many outstanding companies lately, due to dismal Q1 earnings.

"We're looking in tech industries, where revenue is notoriously difficult to predict and where you might find a stock that's taken a big dive after missing earnings. If the company is solid and poised for further growth, it could be your ticket to beating the market."  Click here to learn more about Gunner and his publication, Penny Stock Fortunes. 

If you got in when options guru Steve Sarnoff told you to, your QQQQ options plays nearly doubled in value last Friday ... 96% gains in less than six weeks. 100% seems right around the corner. If so, Steve will have picked four of these "multipliers" already in 2007.  Click here to learn more.

Warm regards,
Addison Wiggin,
The 5 Min. Forecast

P.S. If you're interested in trying options to hedge against risk in your portfolio, why not give Steve Sarnoff's OHL a try? We're still offering half off the annual price for first-time tire kickers, but only for the next six days. Why not give it a try? If you don't like the adrenaline and drama of trading, we offer a money-back guarantee.