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Profit From A Falling US Dollar Without Buying Currencies


The Dynamic Wealth Report
July 31, 2009

The Dollar Is Falling... How To Profit Without Buying Currencies


Can you profit from the falling US Dollar… without buying currencies?  This is a question I get asked a lot.  As many of you know, I’m the editor of the Currency Options Insider service.  I’m always looking for ways to profit from the currency market.

One of the biggest themes this year is the falling US Dollar.  I’ll tell you more about it in a moment.

Profiting from a trend like this isn’t difficult… if you know what you’re doing.  A lot of investors don’t want to put in the time or effort.  They don’t want to learn about the currency market.  They don’t want to study the economic trends or think about the implications.  Let’s be honest, some investors are just plain lazy… and they want everything handed to them on a silver platter.

People like you and I are different.  We’re willing to study and learn.  We’re willing to think things through in a calm, confident manner… and that’s how I stumbled across today’s idea.

I was thinking about the currency markets, as I often do.

One of the most obvious trends I see is the falling US Dollar.

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Do a little research and you’ll see why.  The Federal Reserve and Congress are flooding the economy with greenbacks.  Trillions in reckless government spending.  Another trillion for the financial industry.  Billions for the auto industry. 

Those numbers will scare anyone.

So many new dollars are flooding the economy, the government is worried no one will buy them!  An easy way the Fed creates new money is by issuing bonds.  Up till now, there’s never been a problem selling them (China’s always been a big buyer).

But whispers are starting.

The demand for US government paper may be faltering… and that could be a big problem.

Let’s get back to the key issue.  What happens to all this “easy money”?

The easy money sloshes around our economy and creates inflation.  We’re not seeing it yet, but as the economy starts to recover, we’ll see it in a big way.

It won’t happen all at once.  Inflation will show up slowly.  The economic recovery will start.  Growth in certain sectors will pick up.  We’ll see a decline in unemployment.  Then CPI numbers will move higher… Commodity prices will move higher…

Before long, prices across the board will be up.

And this will destroy the value of the US Dollar.  Just look at this chart. The dollar is in a steady down slope.  And, I don’t see that changing any time soon.

US Dollar Chart

So, how can we profit from the falling US Dollar?

Placing a trade in the currency markets is easy.  But what if you’re not comfortable trading currencies?  Don’t worry, you have other options.

The easiest way is by investing in overseas markets.

But that brings on another question… where should we invest?  My simple answer is… emerging markets.

China’s economy is growing more than 7% this year!  India’s been growing more than 5% a year for the last two decades.  Brazil, Russia, Thailand… the list goes on and on.  Huge economic growth engines can be found within these emerging markets.

I know what you’re thinking… investing internationally is great and all, but what companies should I buy?  How would I even learn how to research international stocks?

I’m going to take the easy way out on that tough question.  Instead of researching and picking an international company or two, I found a diversified emerging market ETF.  It fits the bill perfectly.

WisdomTree Emerging Mkts Small Cap Dividend ETF (DGS) is an ETF holding a number of emerging market stocks.  The ETF is well diversified. No one industry group accounts for more than 18% of their holdings.  It offers great exposure to a mixture of industries including financial services, industrial metals, and consumer goods, just to name a few.

DGS is performing really well year to date.  They’ve managed to rack up a gain of more than 36%.

And here’s a great side note… the companies in the fund pay dividends. Right now you can pick up a yield of just over 5%.

Take a look at DGS.  It’s an easy way to profit from the falling US Dollar. Plus, you get great exposure to high growth markets and a built in 5% return.


Notable Rating Changes 

• OfficeMax (OMX) was upgraded by Citigroup this week.  They now have a "Buy" rating on the stock.  A recovery in the economy will help small businesses and Office Max is a big supplier to small businesses.

Las Vegas Sands (LVS) was downgraded to an “Underperform” rating by Wedbush Morgan.  They must still see weakness in the travel & tourism industry.

• UBS started coverage on Yahoo! (YHOO) this week with a "Neutral" rating.  Big news on their partnership with Microsoft and all they get is a neutral rating… who are they kidding?


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Issue Date:
 Friday, July 31, 2009


Notable Highs and Lows

•  CPI Corp (CPY) hit a new 52-week high of just over $19.  The photo studio company operates over 3,000 locations.  Their market cap is now over $100 million.

•  Ford (F) is trading at a new 52-week high of just under $8.  We’ve talked a lot about this company and are happy to see the stock rising.

•  McAfee (MFE) hit a new 52-week high of just over $45.  The company announced earnings today and beat estimates (despite profits falling 40%). They have a market cap of just over $7 billion.


Quote of the Day

"Don’t fritter away your time.  Create, act, take a place wherever you are and be somebody."

                         -
Theodore Roosevelt

 
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Top YTD Gainers

Company Gain
Diedrich Coffee (DDRX) 6,330%
Heartware (HTWR) 5,751%
Vanda Pharma (VNDA) 2,936%
Scientific Energy (SCGY) 2,400%
ION Media Networks (IION) 2,233%
*Year-to-Date, Mkt Cap > $100M


Worst YTD Losers


Company Loss
First Bancorp (FBP)   71%
CardioNet (BEAT) 71%
Sequenom (SQNM) 70%
Susquehana Banc. (SUSQ) 67%
National Penn Banc. (NPBC) 67%
*Year-to-Date, Mkt Cap > $100M


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