by Alexander Green, Chief Investment Strategist
Monday, December 14, 2009: Issue #1157
We all know why the dollar is in the cellar right now. We also know why it’s expected to continue right through to the basement floor:
There is no reason to believe any of these problems will vanish in the months ahead. Yet the dollar will soar in 2010. Here’s why…
Two Reasons for a Dollar Rebound
There are two main forces that could drive the dollar higher:
When extreme valuations are accompanied by unbridled optimism or abject pessimism, it virtually always marks a turning point – and an opportunity. This is no exception.
Commentators seem to forget that all currency values are contingent. You can’t just look at fundamentals in the United States. You have to look at them abroad, too.
And there isn’t much out there right now that’s terribly positive…
America’s Fellow Heavyweights Have Problems, Too
Take Europe, for example…
The new government there is trying to prevent a double-dip recession by spending even more. But with government debt soaring to records, talk of new stimulus measures is already pushing up long-term rates and threatening to curtail the impact of fresh spending.
Bet on the Dollar in 2010
Recognize that Europe and Japan are hardly experiencing heady economic growth and great fiscal probity. Most are bogged down economically and running fiscal deficits as bad as ours.
And personally, when the whole world is in this big a mess, I’ll take the greenback over the euro, the pound, or the yen. My bet is in 2010, so will most world currency investors.
Virtually no one is expecting it, but the dollar is likely to climb 20% against the euro and the pound next year and 15% against the yen.
Hedging is fine, of course. But if you have too much exposure to foreign-currency denominated bonds, CDs, or bank accounts, rein it in.
Editor’s Note: Have you ever looked at an index, stock, or currency make a huge move in one direction and wondered how you can take advantage of the momentum without getting burned? Many investors blindly follow the herd, unaware of the best times to buy and sell, while others watch the moves with envy, wishing they’d capitalized on them.
Investing on momentum is a very powerful concept – and one that’s easy to follow, as it encompasses just a few simple steps. Alexander Green is a master at finding explosive “momentum stocks” and shows investors exactly how to profit in his Momentum Trader service. For more details, check out this report.