By Justin Spittler, editor, Casey Daily Dispatch
“The dollar will have another big move down.”
Most investors can’t imagine that happening. That’s because, as I showed you on Friday, the U.S. dollar already fell 10% last year—its worst annual decline since 2003.
After such a big drop, most folks assume the worst is over. They expect the dollar to rebound.
But not Jeffrey Gundlach. He’s convinced that the dollar’s headed even lower.
In a recent interview with Barron’s, Gundlach said a “big move down” in the dollar is one of his “higher-conviction ideas.”
I’ll tell you why Gundlach’s so bearish on the dollar in a second. I’ll also show you how to turn a weak dollar into big profits. But first let me tell you why you can’t ignore this big call…
• Gundlach is a world-class investor…
He runs DoubleLine Capital, an investment firm that oversees more than $100 billion. He’s also one of the world’s leading bond investors. On Wall Street, he’s known as the new “Bond King.”
Gundlach also has a knack for nailing big calls.
He even predicted the latest bitcoin crash. On December 13, 2017, he told CNBC, "If you short bitcoin today, you'll make money.”
Four days later, bitcoin topped. It went on to plunge more than 50% over the next month.
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• In short, it pays to listen to Gundlach…
And here’s why Gundlach thinks the dollar will keep falling:
[T]rends in the dollar have a high degree of cyclicality. They tend to last about eight years. We’ve had about an eight-year rally in the dollar that ended, and we had a down year of significance last year. Usually, these things come in groups. When you have a down year that breaks the dollar trend, very often it is followed by the same type of weakness in the future.
In other words, last year’s crash was likely the beginning of a major bear market for the dollar.
And like Gundlach said, this downturn won’t last months or even a few years. It could last nearly a decade.
• As an investor, you absolutely need to be prepared for this…
That’s because the dollar is the world’s most important currency. When it moves, it affects everything from stocks to bonds to real estate.
Big moves in the dollar also affect commodity prices. That’s because many major commodities, including oil, are priced in dollars.
Because of this, commodity prices fall when the dollar strengthens. When the dollar weakens, the opposite happens. Commodity prices rise.
You can clearly see this below. The green line on this chart shows the U.S. Dollar Index (DXY). This index tracks the dollar’s performance against a basket of currencies. The blue line is the S&P GSCI Commodity Index (GNX), which tracks a basket of major commodities.
You can see DXY fell 41% between 2002 and 2008.
It was a much different story for commodities. GNX soared 449% from 2002 to 2008.
It was a great time to own commodities.
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• Then, the global financial crisis hit in 2008…
Commodity prices topped out.
At that exact same time, the dollar bear market ended. The dollar went on to rise 44% over the next nine years.
This period of dollar strength acted as a major headwind to commodities. They fell 55% in that same period.
But the dollar isn’t getting stronger anymore. It’s weakening. And that’s going to propel commodity prices higher for years to come.
But that’s not the only reason why Gundlach’s bullish on commodities.
• Commodities are dirt cheap…
Just look at the chart below.
It compares the S&P GSCI Total Return CME with the S&P 500. When this line is high, it means commodities are expensive relative to stocks. When it’s low, commodities are cheap relative to stocks.
You can see that commodities have never been cheaper relative to stocks.
Not only that, they’re far cheaper than they were before the last mega commodity bull market kicked off in 2002.
• Opportunities like this don’t come around often…
So, consider speculating on commodities if you haven’t already.
You can easily do this by buying the PowerShares DB Commodity Index Tracking Fund (DBC), which tracks an index of 14 commodities.
You could also take Gundlach’s advice and buy the Energy Select Sector SPDR ETF (XLE). This fund invests in 32 major U.S. energy stocks.
If the name rings a bell, it’s because I’ve been urging readers to buy this fund since September.
As I told you, energy stocks are one of the best ways to play the commodity boom today.
If you took my advice, congratulations. XLE is up 13% since then.
If you didn’t get in on this trade, don’t worry. Commodities are still in the early innings of a long-term bull market.
So consider buying XLE on the dips if you haven’t already.
Regards,
Justin Spittler
Denver, Colorado
January 22, 2018
P.S. Doug Casey also thinks commodities are headed much higher in 2018. In fact, he’s saying this could be the biggest speculation of his career. To learn why—and see how you can position yourself to profit from this rare market phenomenon—click here to watch our brand-new video presentation.
Chart of the Day: Gold’s Rally Is Just Beginning
By Joe Withrow, analyst, Casey Research
Today’s chart highlights gold’s big run over the last year.
As you can see, the yellow metal has quietly gained 16% since the start of 2017.
We’ve talked a lot about the blossoming commodity super-cycle over the past two months here at Casey Research… and we even launched a brand-new letter around this idea: Casey’s Big Speculation.
Gold will be a major beneficiary of the trends pushing commodity prices higher.
As regular readers know, we recommend that you allocate 10% of your asset portfolio to physical, hold-in-your-hand gold.
If you haven’t already, this is a great time to build your gold allocation. We expect the price of gold to move higher in 2018…
—Joe Withrow
Reader Mailbag
Today, a reader who’s ready to take our advice…
Longtime reader of your newsletter, but 2018 is my year to trade on your advice. My portfolio is now filled with a bouquet of stocks my friends would never touch. They call my stocks dirty and ugly—I call them beautiful. Thanks.
—Lorene
And another reader responds to Doug’s interview on controversial buzzwords (here and here)…
All of this boils down to just one great law: “Do as thou wilt… but be prepared to accept the consequences.” Doug and/or Justin, greetings from the far south of New Zealand. In relation to the above statement, Robert Louis Stevenson once said, “Sooner or later, everyone sits down to a banquet of consequences.” It's my best guess, and with your excellent research, that the banquet for our time is rapidly approaching.
—Lewis
Are you capitalizing on our big ideas so far in 2018? Let us know right here.
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