Sean Hyman
Contributing Writer
instructor@mywealth.com
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This past year, the dollar could do no wrong. It has soared as almost every asset around the world crashed. So why in the world would that start to change?
- The risk appetite is slowly returning to all markets. Fear and volatility gauges have calmed down majorly (like the VIX, Libor rates, the TED spread, etc.). When risk aversion was the flavor of the day, the dollar flourished. However, if markets calm down and regain their sanity (as they are starting to do even now), then the dollar will take the back seat to higher interest yielding currencies.
- GM’s bankruptcy. If General Motors goes bankrupt, and it looks like they will, then there is going to be a lack of confidence in the U.S. dollar. GM is an American icon, and if it goes into bankruptcy (even though it will re-emerge from it), it doesn’t bode well for the dollar.
- Friction with China. One thing I can say about George Bush is that he had sense enough to get Hank Paulson as his Treasury Secretary. Paulson knew how to deal with the Chinese. So far, no one in the Obama administration seems to have a clue as to how to deal with them. Normally, China buys our U.S. treasuries like clock work each month. However, in January and February, they were net sellers of our bonds.
- Commodities have reversed their downtrends lately. This is not good from the dollar’s point of view since the dollar is on the opposite side of the teeter totter from commodities. As gold, oil, copper, lumber, etc. have stopped falling and consolidated sideways…and some have even gone back into up trends lately, it doesn’t bode well for the greenback.
- Money has started to move back into emerging markets (into their currencies, bonds and stocks. When investors are willing to start to stick their necks out that far for returns and interest rate yields once again, the last place they will stay is in the U.S. dollar.
- U.S. Treasuries will crumble. While this part may not happen immediately (due to the Fed propping it up artificially as they buy them to drive rates down further), every money manager out there knows that this shoe will drop. When it does, the last place you want to be invested is in the U.S. dollar. This is yet another reason why money has recently run to emerging market currencies and commodity currencies (like New Zealand and Australia). Thus the “carry trade” is re-emerging once again!
- The dollar index is failing to make new highs. The dollar can’t seem to muster up enough strength, technically on the charts, to break into new highs as it’s done for the past year or so. This shows that money is already “sneaking out” of the dollar and most investors are oblivious to it. They’re waiting for the same song to continue that’s been playing for a year or more now. However, the tune is changing and they can’t hear it.
Learn how to Profit from the Fall of the Dollar!
With all of these things starring the dollar square in the face now, the tide is turning and the dollar’s luck is about to run out once again. This means that it’s a good time to learn about currencies and how to get into foreign currencies (except the yen) and get away from the dollar.
The dollar and yen are starting to crumble and this will continue as the world finally regains some traction after about every central bank in the world has brought the cost of money down to almost zero and has poured in bucket loads of money into their economies. The death cycle that’s been in place for the past year and a half globally is about to come to an end in the months ahead and institutional investors want to get positioned for it before you guys on Main Street know all about it.
Then once they’ve got their money invested, they will finally come on CNBC and Bloomberg TV and tell you guys all about it so that you can push up their positions once again.
This is why you need to start learning NOW how currencies work so that you can avoid the next downdraft in the dollar and enjoy the appreciation that foreign currencies can bring to you.
Open a free currency trading demo account here so that you can see how these trade in real time.
Once you are ready to invest in currencies in a real account, you can get started here.
Learn about Indicators in our Course that Point to a Downturn Coming in the Dollar.
Contributing Writer
instructor@mywealth.com
