Thursday, April 21, 2011

Consumer Staple Stocks To Watch: MO, PG, PM, SPY, WMT, XLP

There's nothing wrong with flying first class, but coach fares have looked more appealing lately. The ongoing old battle between utility and extravagance becomes clearer during tough economic times. Consumers have cut back on big ticket items like new cars and high priced vacations outside the U.S. As the shift toward utility purchasing grows, investors should consider how a basket of consumer goods could balance their portfolios.

Everyday Goods
The Consumer Staples SPDR ETF(AMEX:XLP) covers a wide range of companies that produce everyday goods like medicines, colas, household items and personal products. Most investors probably have used at least one product or service offered by one of XLP's consumer goods holdings. Procter & Gamble (NYSE:PG),Wal-Mart (NYSE:WMT) and Phillip Morris International (NYSE:PM) dominate more than one-third of the fund's portfolio. Therefore, it's time to take a look at a few of the companies that make up the XLP. (For more reading on ETFs, check outFive Ways to Find a Winning ETF.)

Goods For All Occasions
Whether it's the stuffy head fever reliever, NyQuil, the specially formulated baby clothing detergent, Dreft, Procter & Gamble is there to meet many consumer needs. However, the shares are flat over the past twelve months, while the SPDR S&P 500 Index ETF (AMEX:SPY) is up more than 10% over the same period. (For more, see A Guide To Investing In Consumer Staples)

Discount Leader
One-stop shop Wal-Mart is visited weekly by more than 100 million customers worldwide. Well-placed stores, fully-stocked shelves and low prices form a triple threat against competitors who wish to beat out the retail giant in the competition for consumers, who lately have focused spending more on food and household necessities, than extravagances.

Not Altria Anymore
Philip Morris International split away from its parent company Altria (NYSE:MO) in March of 2008. Philip Morris targets its tobacco products in the European Union, the Middle East, Africa, Asia and Latin America. Philip Morris International stock has outperformed the S&P500 with a twelve month performance of 28%. (For more on socially responsible investing, check out A Prelude to Sinful Investing.)

Final Thoughts
It's safe to say that the business of consumer staples and investing in them is boring to some people. The demand for these products does not swing up and down and they don't exhibit the flashy characteristics of their close relative, the consumer cyclical.

They do, however, offer investors an opportunity to diversify into a sector that is easy to understand, has a relatively low beta and a low correlation to the overall market. So the next time you go to buy a razor when the stock market is in a tailspin, take a look at the company that makes that razor: it might be a good time to buy its stock.

Bank of America Sees UK Brent Oil Surging to $140 Read more: Bank of America Sees UK Brent Oil Surging to $140

Bank of America Merrill Lynch said it expected Brent crude to hit $140 a barrel in the next three months, before falling later in the year as high prices curb demand.

Brent crude has traded as high as $127.02 in 2011, the highest since 2008 when prices reached an all-time peak above $147.

Influential banks in commodities are expressing contrasting views on whether the rally will persist.

"The time is not yet ripe for oil demand destruction, and we maintain our view that Brent oil will average $122 a barrel this quarter, with prices temporarily breaking through $140 a barrel in the next three months," said the report dated April 19 by Bank of America Merrill Lynch analysts, including Francisco Blanch.

"However, with the first signs of demand destruction on the horizon and credit risks on the rise, we keep our view that Brent will average $94 a barrel in 4Q11."

Bank of America's view contrasts with that of Goldman Sachs, which on April 12 said it expected the market to experience a "substantial correction" towards its near-term target for Brent of $105 in the coming months.

Deutsche Bank also sees room for higher prices. On April 12, it raised its 2011 Brent forecast to $117.50 from $107.75.

Read more: Bank of America Sees UK Brent Oil Surging to $140

It's Time To Invest In Brazil: BRFS, CZZ, GE, KO, PBR, VALE

While investor awareness of Brazil is certainly viable, sometimes this country may suffer from hiding in China's wings. For obvious reasons, everyone mentions China, China, China when looking at investing abroad. However, Brazil is no sleeping giant; this resource-rich country has transformed itself into a nation exceptionally worthy of long-term investment consideration. Over the next six years, Brazil will host the two largest sporting events in the world: FIFA World Cup in 2014 and the Olympics in 2016.

Best To Bet On The Country
Unless you have the time and resources to visit with Brazilian businesses, most investors will find participating in Brazil's quality and well-established businesses a very productive way to benefit from this country's wonderful future. After all, one would have done exceedingly well betting on companies like Coca-Cola (NYSE: KO) andGeneral Electric (NYSE:GE) some 50-60 years ago in the U.S. Clearly, Brazil's investing climate should be viewed with a greater degree of caution namely due to political risks. (For related reading, check out Go International With Foreign Index Funds.)

Titans Of Brazil
Brazil, like Latin America in general, is known for its abundant resources like arable land, water and other commodities. Petroleo Brasileiro (NYSE:PBR) is Brazil's largest oil company, trading at 8.4 times earnings. Over the past couple of years it has discovered massive deposits off the coast, considered one of the biggest finds in years. Cosan (NYSE: CZZ), a lesser-known company, makes and sells sugar and ethanol and trades for ten times earnings, although debt is a little higher than many investors would like to see. (For more, see Sugar: A Sweet Deal For Investors.)

Mining giant Vale (NYSE: VALE) is a great play on commodities in one of the most resource-rich nations. This $173 billion giant produces iron ore, aluminum, copper, coal and other lesser-known but essential commodities. Finally, Brasil Foods (Nasdaq:BRFS) sells processed foods and is the major player in Brazil. It is a dominant producer of processed meats in Brazil, but its product line stretches from frozen vegetables to dairy to pizzas and lasagnas.

Here To Stay
Brazil's economy is expected to continue to grow and it's a resource-rich country with a growing middle class. As long as the politics don't take a change for the worse, it should not be ignored from an investment perspective.

Resource guru Sprott: Silver could go higher than almost anyone believes

From Eric Sprott and Andrew Morris

Follow The Money

You know silver’s doing well when the commentators start giving it the ‘gold’ treatment. Silver’s recent rise has been so spectacular that it’s caught many investors off guard. It’s natural to be sceptical when you don’t know the fundamentals driving strong performance, and many pundits and commentators have been quick to downplay it as a result - much like they do towards gold when it enjoys a run. Silver is also an awkward metal for them to categorize. Is it a commodity, a monetary metal, or both? And which side is driving demand? If it’s industrial demand, that’s ok, because that’s bullish. But if it’s investment demand for silver as ‘money’, well then that’s sort of bearish, isn’t it?The fact remains that most commentators have failed to grasp the monetary shifts that silver is signaling today, and in doing so they’ve failed to appreciate just how high it could actually go.

The financial media’s failure to grasp the benefits of precious metals ownership continues to perplex us, and it’s not just the commentators who are prone to perpetual disbelief. The sell side analysts are equally as irresolute. According to Bloomberg, the ‘expert’ consensus silver price forecast for 2011 is $29.50, representing a 31% discount from the current spot price. This same group of analysts also predicts prices will decline another 25% in 2012 and a further 9% in 2013 to $20 an ounce. When you consider that the silver price has appreciated by over 21% annually over the past 10 years, these forecasts suggest a very dramatic change in the long-term trend. Will this reversal come true? Probably not. These were the same analysts who predicted that spot silver prices would average $18.65 this year - so they’ve missed the mark by over 100% thus far.

We don’t mean to bash the silver analyst community, and there are several whom we highly respect, but it is important for silver investors to appreciate that these price forecasts are being plugged into financial models that dictate equity valuations. These models are used by traders, bankers, analysts, and portfolio managers to derive valuations for silver stocks and create asset allocations for portfolios. To anyone questioning current silver equity valuations, we would ask: what price assumptions are you using? Of course we as allocators of capital are thankful for this phenomenon, as it allows us to buy our favourite silver stocks on the cheap, knowing full well that the herd will be following behind in due course as those backward-looking forecasts get ratcheted higher.

How can we be so confident that the price of silver will continue on its upward trajectory? Our thesis is premised on the most rudimentary of economic principles – supply and demand.

One of the key indicators that we’ve been monitoring is the gold/silver ratio. Much has been written about the ratio of late, and we won’t go into great detail on the subject, other than to note that the last time money was synonymous with defined amounts of gold and silver, the ratio was set at 16-to-one. In fact, for most of the past millennium, one ounce of gold would have been convertible to somewhere between 10 and 16 ounces of silver - an amount roughly in line with the relative occurrence of each mineral within the earth’s crust.1 For the better part of the past century, due to the world’s abandonment of bimetallism and then the gold standard, the gold/silver ratio has fluctuated widely, twice reaching lows near the 15-to-one mark and a high of 100-to-one back in the early 1990’s. The most recent high reached in the latter part of 2009 was nearly 80-to-one. Since then the ratio has been tumbling to where it stands now at 35-to-one – which reflects the incredible outperformance of silver over that time period. In our opinion, this ratio will continue to move lower, driven by nothing more than basic supply/demand fundamentals.

The US Mint, which is the world’s largest silver and gold coin manufacturer, recently reported that it had sold 13 million ounces of silver coins and 370 thousand ounces of gold coins on a year-to-date basis.2 This means that the US Mint is now selling roughly equal amounts of silver and gold in dollars so far this year. Furthermore, bullion dealers like Sprott Money and GoldMoney have confirmed with us that they are now selling more silver than gold in dollar terms. For additional confirmation of this investment trend, just look at the flows for the two largest gold and silver ETFs. Investors have withdrawn approximately $3 billion from the GLD so far this year while the SLV has seen net inflows of $370 million over the same period. Dollar for dollar, investors are allocating as much if not more money to silver than to gold. And why shouldn’t they? Silver is much more of a "precious" metal than the current ratio of 35-to-one would suggest.
To explain, we must first address mine supply. In 2010, the world mined approximately 736 million ounces of silver and 85 million ounces of gold.3 The world also produced an additional 215 million ounces of silver and 53 million ounces of gold from recycled scrap.4 Adding both together brings us 951 million ounces of silver and 139 million ounces of gold supply, for a ratio of nine ounces of silver to one ounce of gold.

Interestingly, this 9-to-one ratio is very similar to the ratio of available in-situ silver and gold reserves. The U.S. Geological Survey estimates that there are current in-situ reserves of approximately 16.4 billion ounces of silver versus 1.6 billion ounces for gold, or about a 10-to-one ratio.5

The case for silver is even more compelling when one considers the ramifications of its dual role as both an investment and industrial metal. Last year, non-investment demand for silver (which includes industrial, photographic, and silverware demand) totaled approximately 610 million ounces.6 This represents approximately 64% of primary supply, leaving approximately 341 million ounces to satisfy investment demand.7 On the gold side, industrial usage totaled 13 million ounces, or about 10% of primary supply, leaving approximately 125 million ounces left over for investment demand.8 So, after netting out the industrial usage the primary supply left over for investment demand is about 2.7 times that for gold. However, if we convert those ounces to dollars at current prices, we’re left with $15 billion worth of silver available for investment versus $186 billion worth of gold, or a one-to-13 ratio of silver to gold! This means that in terms of primary supply, silver only has 8% of the capacity for investment that gold does despite having equal if not more dollars flowing into it.

Now, it’s true that another potential source of supply is the very silver that investors already own - and at the right silver price these inventories of silver and gold bullion may be sold into the market to supplement any supply shortfalls. As we’ve noted previously, however, due to decades of underinvestment, the amount of silver bullion inventories are actually extremely small, even compared to those of gold.9 Recent estimates suggest that reported silver bullion inventories stand at roughly 1.2 billion ounces versus 2.2 billion ounces of gold bullion, or roughly a 0.5-to-one ratio.10 To put that amount in perspective, consider that at present there is only $52 billion worth of silver bullion/coins and over $3.3 trillion worth of gold in inventory which could potentially be recirculated into the market. Converting this to a ratio, you get a one-to-63 ratio of silver to gold inventories. So how is silver still priced at 35-to-one?!

All indications lead us to believe that there is now roughly an equal amount of investment flowing into silver and gold on a dollar-for-dollar basis. And although the price ratio of silver to gold has fallen substantially since the highs of 2009, our analysis strongly suggests that this ratio must move lower to restore a fundamental balance between supply and demand. Only time will tell how much lower it will go, but we would not be surprised to see it hit single digits before settling into a more sustainable equilibrium.

What the so-called silver ‘experts’ neglect to account for in their models and projections is that the fiat money experiment has failed. And in this context, we believe the Market has assigned world reserve currency status to gold - not USD, not EUR, and not JPY. In our opinion, gold’s continued appreciation vis-à-vis every currency is assured because the great flight from fiat has only just begun. Like gold, silver also has a long monetary history, and as such, investors are now also buying silver as protection from the ravages of fiat currency debasement. Yet, when compared to gold, it is silver that offers the most attractive value proposition by virtue of the gross mispricing of its scarcity, which, we might add, has existed for many years. Thus, in our opinion, as this new bimetallic standard takes root, silver investors will continue to be justly rewarded with marked outperformance. We truly believe that this is the investment opportunity of a lifetime, and increasingly so, others are taking heed. What is clear to us is that with equal investment dollars now flowing into silver and gold, the current 35-to-one ratio is unsustainable and has only one direction to go: lower.

Tesla (TSLA) to $70 a share?

Tesla Motors (TSLA), currently trading at $25 a share, recently scored a major upgrade.

Electric vehicles may rise to 5.5 percent of global sales by 2020 and more than 15 percent of deliveries by 2025, Adam Jonas, a Morgan Stanley analyst based in New York, wrote in a note today. Tesla, which makes the $109,000 Roadster and will begin selling the lower-priced Model S sedan next year, may sell 500,000 vehicles by 2025, Jonas said.

“Tesla has a viable opportunity to be a significant volume player in the global auto industry,” Jonas wrote. “The transformation from California startup to global auto player may require well more than a decade to achieve -- not unlike the genesis of many of today’s established automotive companies.”

Tesla said earlier this week it has delivered more than 1,500 of the Roadster since the model was introduced in 2008. The company aims to produce as many as 20,000 Model S sedans a year by 2013.
Jonas upgraded the company’s rating to “overweight” from “equal-weight” and said the shares may rise to $70.

Tesla’s Obstacles

Morgan Stanley’s expectations for electric-vehicle demand may be “a stretch,” Mike Omotoso, senior manager of the global powertrain section of consultant J.D. Power & Associates, said in an interview. Electric vehicles will make up 2 percent of the global market by 2020, J.D. Power estimates.

“The obstacles are high up-front costs of the vehicle, the limited driving range, and the lack of infrastructure,” said Omotoso, who’s based in Troy, Michigan. “All those obstacles are going to take 10 years or more to overcome, and there are a lot of other alternatives consumers have to reduce gas consumption.”

Morgan Stanley’s Jonas called Tesla “a highly speculative investment” due to the risks of slow electric vehicle adoption, model-introduction delays and balance sheet “difficulties.”

Tesla, which is backed by Daimler and Toyota Motor Corp., may need to raise additional capital because liquidity could fall to $146 million by the end of 2013, Jonas wrote.

‘Room for Error’

“Will Tesla run out of money?” he wrote. “We don’t think so. But there’s also not much room for error.”
Tesla, based in Palo Alto, California, in February said its fourth-quarter net loss widened to $51.4 million from $24.2 million a year earlier as it increased investment in the Model S sedan, its next all-electric model that will start at about $57,400. The Model S will be profitable even on the base model, J.B. Straubel, Tesla’s chief technology officer, said March 17.

Tesla posted revenue of $116.7 million for 2010 and has said sales may increase to $160 million to $175 million this year. Morgan Stanley’s Jonas wrote that revenue may climb to $9.5 billion by 2020 with a 3.6 percent share of the global electric vehicle market by that time.

Mastery Bottom Line:

Sounds a little to good to be true, but Tesla could be the "next big thing". Think the iPhone for cars. It wouldn't hurt to allocate some funds in your portfolio to TSLA.

3 Companies That Will Benefit From the Peak Fish Dilemma: MNHVY.PK, NUTCF.PK, TSN

A new study of industrial fishing practices has found that the world’s fish catch peaked more than 20 years ago and has been declining since. Worse, it finds that the steady increases in the catch prior to the 1980s were achieved not because there were lots of fish. Rather, because the industry constantly moved to new fisheries, leaving behind depleted ones.

The study, conducted by the University of British Columbia and the National Geographic Society, found that the world catch of fish went from 19 million metric tons in 1950, when the UN Food and Agriculture Organization (FAO) began compiling records, to 90 million metric tons per year in the late 1980s. The steady increases were cited by the industry as evidence that the fisheries were healthy and productive. In fact, the new research shows, the industry was exhausting and abandoning fishing ground after fishing ground, masking the depletion by moving to unexploited areas.

After the 90-million-tonne high point, the world catch fell to 87 million in 2005, the last year covered by this study, and continued to plummet to fewer than 80 million in 2008, according to the FAO. In the documentary movie The End of the Line you can watch the reckless plundering of fish. Industrial fishing is so effective that scientists predict that 'business as usual' practices will see the end of most seafood by 2048. That would be about the time human population peaks at around 9 billion – and about 20 years after we pass the 450ppm carbon dioxide and two or more degrees of the global warming threshold.

The End of the Line chronicles the decimation of fish populations with modern fleets that use military technology and spotter planes.

The UN Food & Agriculture Organization, reckons that the world produced 145.1m tonnes of fish in 2009. About 38% of this came from aquaculture, or fish farming. The rest consisted of fish caught in the wild, mostly at sea. In 2008, over three-fifths of the world’s farmed fish came from China. India was the second-largest producer, but its output was just over a tenth of China’s. Myanmar produced only 7,000 tonnes of farmed fish in 1990. By 2008, its output of 675,000 tonnes made it the world’s twelfth-largest aquafarming producer, with an output larger than America’s. Japan and Taiwan (not shown) are the only producers in the top 15 where output was smaller in 2008 than in 1990.

Fishery and Aquaculture Statistics

The fisheries and aquaculture sector is crucial to food security, poverty alleviation and general well-being. In 2008, the world consumed 115 million tonnes of fish, and demand is rising. Fish and fishery products are a vital and still affordable source of food and high-quality protein. In 2008, fish as food reached an all-time high of nearly 17 kg per person, supplying over 3 billion people with at least 15% of their average animal protein intake.

The increasing demand for fish highlights the need for sustainable management of aquatic resources. The generally increasing trend in the percentage of overexploited, depleted and recovering world marine stocks compared with the decreasing trend in those that are underexploited gives cause for concern. Aquaculture will become more and more important and is the fastest-growing food producing sector (+6.6% p.a.). It is set to overtake capture fisheries as a source of food fish.


There are several companies in different sectors that can benefit from the Peak Fish dilemma. The first one is Nutreco, also mentioned in one of my published articles on Seeking Alpha.

Nutreco (NUTCF.PK) is an international producer of animal nutrition (54% of sales of EUR 4.9 billion in 2010), fish feed (27%) and meat/other (19%). Nutreco's business groups have over 100 production and processing plants in some 30 countries, with sales in 80 countries.

In terms of revenue, the company is among the top three companies in the global animal nutrition industry. The company has a leading 38% market share in salmon feed (75% of total fish feed). In pre-mixes, Nutreco is the world's second largest player with a 12% market share. Also it is the fifth-largest compound feed producer with a 1% global market share.

Nutreco has strong positions in its traditional markets in Europe and North America and has a foothold in key growth regions such as China, Brazil and Russia. Last year the company invested in capacity expansion to facilitate growth in feed specialties and fish feed.

Marine Harvest

The second company comes from Norway and is listed on the Oslo Stock Exchange. Marine Harvest trades in the U.S. as MNHVY.PK.

Marine Harvest is the world’s leading seafood company offering farmed salmon and processed seafood to customers in more than 70 markets worldwide.

The company is present in all major salmon farming regions in the world and the biggest producer of farmed salmon, with one fifth of the global production. In addition to fresh and frozen salmon, Marine Harvest offers a wide range of value added products such as coated seafood, ready-to-eat meals, delicious finger foods and smoked seafood. Though salmon is the main farmed product, the company also farms trout and white halibut.

Marine Harvest Group is the result of the merger between Pan Fish ASA, Fjord Seafood ASA and Marine Harvest N.V. in 2006 and employs 4800 people and has operations in 21 countries worldwide. The company has salmon farming and processing activities in Norway, Chile, Scotland, Canada, Ireland and the Faroes. Value adding processing activities take place in the U.S., France, Belgium, the Netherlands, Poland and Chile.

Marine Harvest has published the Industry Handbook 2010. The purpose of this handbook is to give financial analysts, investors and other stakeholders better insight into the salmon farming industry.

Tyson Foods

The last company which could profit from the Peak Fish story is an American company called Tyson Foods (TSN). Tyson Foods, Inc. is a multinational corporation based in Springdale, Arkansas, that operates in the food industry. The company is one of the world's largest processors and marketers of chicken, beef, and pork, and annually exports the largest percentage of beef out of the United States.

Tyson Foods is one of the largest U.S. marketers of value-added chicken, beef and pork to retail grocers, broad line food service distributors and national fast food and full service restaurant chains; fresh beef and pork; frozen and fully cooked chicken, beef and pork products; case-ready beef and pork; supermarket deli chicken products; meat toppings for the pizza industry and retail frozen pizza; club store chicken, beef and pork; ground beef and flour tortillas.

It supplies all Yum! Brands (YUM) chains that use chicken (including KFC and Taco Bell), as well as McDonald's (MCD), Burger King, Wendy's (WEN), Wal-Mart (WMT), Kroger (KR), IGA, Beef O'Brady's, small restaurant businesses, and prisons.

The three companies described above are leaders in their industries and could benefit hugely the coming years when Peak Fish gets more attention in the investor's space.

Interview: Jim Sinclair on Gold and the World Financial System

The Hera Research Newsletter (HRN) is pleased to present an in-depth interview with Jim Sinclair, Chairman and CEO of Tanzanian Royalty Exploration and founder of Jim Sinclair’s MineSet, which hosts his gold commentary as a free service to the gold investment community.

Jim Sinclair is primarily a precious metals specialist and a commodities and foreigncurrency trader. He founded the Sinclair Group of Companies in 1977, which offered full brokerage services in stocks, bonds, and other investment vehicles. The companies, which operated branches in New York, Kansas City, Toronto, Chicago, London and Geneva, were sold in 1983.

From 1981 to 1984, Mr. Sinclair served as a Precious Metals Advisor to Hunt Oil and the Hunt family for the liquidation of their silver position as a prerequisite for the $1 billion loan arranged by the Chairman of the Federal Reserve, Paul Volcker.

He was also a General Partner and Member of the Executive Committee of two New York Stock Exchange firms and President of Sinclair Global Clearing Corporation (a commodity clearing firm) and Global Arbitrage (a derivative dealer in metals and currencies).

In April 2002, shareholders of Tanzanian Royalty Exploration (formerly Tan Range Exploration) approved the acquisition of a Sinclair managed private company, Tanzania American International, and its exploration assets in Tanzania. Subsequently, Mr. Sinclair became Chairman of Tanzanian Royalty and now leads its efforts to become a gold royalty and development company.

He has authored three books and numerous magazine articles dealing with a variety of investment subjects, including precious metals, trading strategies and geopolitical events and their relationship to world economics and the markets. He is a frequent and popular commentator on financial and market related issues in various news publications and has been profiled in the New York Times.

In January 2003 Mr. Sinclair launched, Jim Sinclair’s MineSet, which now hosts his gold commentary and is intended as a free service to the gold community.

Hera Research Newsletter (HRN): Thank you for speaking with us today. You are one of very few people who have tried to warn investors about OTC derivatives. Why are OTC derivatives a problem in your opinion?

Jim Sinclair: Over the counter (OTC) derivatives are the reason we are going through what we are going through now. An OTC derivative is a kind of wager on what something will do. Up until 2009, most of these wagers had very little, if any, money behind them and, if the direction you bet on didn’t come to fruition, the amount of leverage resulted in extraordinary losses. There was a major rollover in derivatives tied to real estate in 2008, as well as in other types, such as those tied to sub-prime auto loans.

HRN: Did OTC derivatives destabilize the financial system in 2008? (more)

Dollar weakens against most major currencies

The dollar fell against most major currencies Wednesday, hitting a 15-month low against the euro, after solid earnings from major U.S. companies and a healthier reading on the housing market fueled investors' appetite for currencies linked to higher benchmark interest rates.

Higher interest rates tend to support investor demand for a currency, since it can generate a bigger return on investments denominated in that currency. The Federal Reserve has kept its key rate near zero since December 2008, while most of the world's other central banks are raising interest rates.

The euro jumped to $1.4514 in afternoon trading Wednesday from $1.4340 late Tuesday. Earlier, the euro hit $1.4547, its highest point since January 2010.

The dollar had advanced against the euro earlier in the week as speculation mounted that Greece would need to restructure its debt, but that fear wasn't weighing on the euro Wednesday as investors turned to assets of countries where interest rates are higher.

Greece's finance minister also said that the country's debt was "absolutely sustainable."

Investors' distaste Wednesday for the low-yielding dollar came after good news from major corporations and the troubled housing sector. The Commerce Department said that home construction rose 7.2 percent in March from February. Building permits, an indicator of future construction, rose 11.2 percent after hitting a five-decade low in February.

Strong earnings from technology companies in the U.S., including those from Intel Corp. and Yahoo Inc., pushed U.S. stocks higher, with the Dow Jones Industrial Average rising 1.5 percent. Oil prices settled above $111 per barrel on the New York Mercantile Exchange, while gold settled at $1,498.90 an ounce, its seventh consecutive day of gains.

The dollar, which investors consider a safe-haven currency, tends to give ground to the euro and other currencies perceived as riskier when prices for stocks and commodities rise.

In other foreign exchange trading, the British pound rose to $1.6407 from $1.6317. The dollar was unchanged at 82.37 Japanese yen.

The dollar also fell to 0.8890 Swiss franc from 0.8993, earlier touching a record low of 0.8876 Swiss franc, and dropped to 95.46 Canadian cents from 95.69 Canadian cents. The Australian dollar shot up to as much as $1.0692, its highest point against the dollar since it began trading freely in 1983.

The dollar was also lower against the Scandinavian currencies and currencies of developing economies.

$6 Gas? Could Happen if Dollar Keeps Getting Weaker

A dollar plumbing three-year lows is hitting Americans squarely in the gas tank, and one economist thinks it could drive prices as high as $6 a gallon or more by summertime under the right conditions.

With the greenback coming under increased pressure from Federal Reserve policies and investor appetite for more risk, there seems little direction but up for commodity prices, in particular energy and metals.

Weakness in the US currency feeds upward pressure on commodities, which are priced in dollars and thus come at a discount on the foreign markets.

One result has been a surge higher in gasoline prices to nearly $4 a gallon before the summer driving season even starts, a trend that economists say will be aggravated as demand increases and the summer storm season threatens to disrupt oil supplies.

"All we have to have is a couple badly placed hurricanes which could constrain some of the refinery output capacity in some key locations," says Richard Hastings, strategist at Global Hunter Securities in Charlotte, N.C. "If you get weakness in the dollar concurrent with the strong driving season concurrent with the impact of one or two hurricanes in the wrong place, prices could go up in a quasi-exponential manner."

Using a model that combines "subtle rates of change" with movements in the dollar index [.DXY 74.36 -0.67 (-0.89%) ]and commodity prices, Hastings figures the low dollar is responsible for about one-third, or $1.31, of the total gas-at-the-pump cost. Regular unleaded Wednesday was $3.84 a gallon nationwide, according to AAA.

While there's far from unanimity about the dollar's future course, the proportionate contribution that currency weakness makes to oil prices is clear.

The dollar as measured against a basket of foreign currencies has dropped 6 percent this year, while regular unleaded gasoline is up about 28 percent.

Gas prices also have been boosted from turmoil in the Middle East which in turn has triggered a wave of speculation that traders estimate has added about $15 or so to the cost of a barrel of crude [CLCV1 111.36 -0.09 (-0.08%) ], which is now teetering above the $110 mark.

Hastings sees gasoline having "no problem" getting to $6.50 a gallon over the summer after increased demand and storm disruptions come into play.

Others, though, say gasoline prices haven't needed any help so far from other events—the moves by the Fed to keep interest rates in negative real terms are enough to boost energy by themselves.

Michael Pento, senior economist at Euro Pacific Capital in New York, says there is an almost perfect negative correlation between the falling dollar and oil prices—minus-0.9 to be exact.

"When you have negative correlations that strong, it's not hard to understand that the reason why we're having this price spike in commodities is primarily because of the weaker currency and not because of shortages of oil or international tensions or global growth," Pento says.

The assertion from Hastings that the weak dollar is responsible for one-third of the total cost for a gallon of gas "sounds very low," Pento says, adding that a barrel of oil should be closer to the $65 to $70 range if priced properly.

"That's exactly where it would be if we weren't crumbling our currency," he says.

Should events follow their current course, sharply higher gas prices will burden consumers further as they also cope with the rise in food costs this year.

Hastings projects the dollar index to test 72 at some point—another 3 percent drop—while Peter Cardillo, chief economist at Avalon Partners in New York, sees the dollar dropping to the 73.50 level.

"The global economy is quite strong, and the weak dollar is basically fueling even higher energy prices. That's not transitory," Cardillo says. "Gas prices in the Northeast are over $4 a gallon. How could anyone say that's not a burden?"