By Justin Spittler, editor, Casey Daily Dispatch
The U.S. dollar is in trouble.
It’s down 10% over the past year and is trading at its lowest level since December 2014.
It’s likely to keep plunging, too. In fact, one of the world’s top research firms thinks the dollar may not recover until 2025.
If you’ve been reading the Dispatch, you know why this is such a big deal. In short, a weak dollar would have massive ramifications for global markets. It could even be the needle that pops the bubble in U.S. stocks.
That’s the bad news. The good news is that a weak dollar could also spark an explosive rally in one of the world’s most depressed assets.
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• I’m talking about commodities…
Major commodities include hard assets like copper, zinc, and lumber. In other words, they’re the building blocks of civilization.
That alone is a reason to invest in them. But most investors aren’t doing that. They want nothing to do with commodities. That’s because they’ve been in a long downtrend since 2008.
Just look at this chart. It shows the performance of the PowerShares DB Commodity Index Tracking ETF (DBC). This fund tracks commodity prices.
DBC is down 64% since 2008. That’s a staggering decline.
• This is why many investors have given up on commodities…
It’s why they’ve moved on to high-flying tech stocks and other “flavor of the month” investments.
But that’s the last thing you should do right now. You see, the best investors don’t buy what everyone else is buying. They buy assets investors have left for dead.
That’s how Doug Casey and many other world-class investors made their fortunes. And here’s the thing…
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• Commodities are the most hated asset class on the planet…
According to Doug, “Nobody cares about them.” And he’s absolutely correct.
Just look at this chart. It compares the S&P GSCI Total Return CME Index 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. And that’s where we are today…
Commodities have never been cheaper relative to stocks.
That’s remarkable, but it’s not a good enough reason to buy commodities. You see, commodities have been cheap for years… and all they’ve done is keep falling.
So what’s changed? Simple.
• The U.S. dollar has tumbled in recent months…
This is a huge deal for the commodity market. And that’s because most commodities are priced in dollars.
Because of this, most commodities are inversely correlated with the dollar. They zig when the dollar zags.
You can see what I mean below. The blue line is DBC. The green line is the U.S. Dollar Index, which tracks the dollar’s performance against a basket of major trading-partner currencies.
As you can see, the weak dollar has given commodities a huge boost. DBC is up 13% since last July, while the dollar is down 6% over the same period.
But don’t worry if you missed out on this initial rally.
• The dollar is in the early innings of a major bear market…
Now, look, I realize some folks will have a tough time accepting this. Most Americans assume the dollar will stay strong forever. It’s the world’s reserve currency, after all.
But I’m not the only analyst calling for a weak dollar. 13D Research thinks the current dollar downturn could last seven years.
If you read Tuesday’s Dispatch, you know 13D is one of the world’s most exclusive research firms. Large money managers and hedge funds pay top dollar for its insights.
And like me, 13D expects the weak dollar to give commodities a huge lift. It wrote last month:
The dollar’s breakdown further confirms that capital-dispersion into the world’s longest-depressed markets and commodities is likely to continue to accelerate—possibly sharply—as the USD falls steadily in the coming months and years.
In other words, 13D expects the dollar to weaken even more, and that should trigger a sharp rally in commodities. It’s so confident in this call that it thinks commodities could be one of the best investments for years to come:
Markets and sectors that suffered the most during the previous deflationary-trends from 2009 to 2015 are likely to have some of the best relative-performance trends as the dollar’s bear-market unfolds.
In short, the weak dollar could be the catalyst that the commodity market has been waiting on for nearly a decade.
• So, consider speculating on commodities if you haven’t already…
Just be sure to act soon.
The rally we’re seeing in commodities could soon turn into a full-blown mania. 13D explains why:
This could create a self-fulfilling cycle of growth that attracts more capital away from the dollar and causes commodity prices to rise beyond expectations—a mirror image of the collapse of commodity prices beyond downside expectations when the dollar was strengthening.
You can easily bet on commodities by buying DBC or another major commodity fund.
For even more upside, consider buying shares of a large, diversified miner. These companies are leveraged to commodity prices. It doesn’t take a big move in commodity prices for their share prices to skyrocket.
Just understand that mining stocks are highly volatile, so treat them like a speculation.
Don’t bet more money than you can afford to lose. Use stop losses. And take profits when you get them.
This way, you’ll be able to capture big profits without exposing yourself to heavy losses.
Regards,
Justin Spittler
Tulum, Mexico
February 8, 2018
P.S. Casey’s Big Speculation editor and commodities expert David Forest says we’re on the verge of the next major commodity supercycle. He says the time to get involved in commodities is not when they’re already front-page news and prices have soared… It’s now.
This is the market we’ve all been waiting for… and we’re going to see some incredible moves in commodities in the next few years. To learn how you can position yourself to profit from this rare market phenomenon, click here to watch our brand-new video presentation.
Reader Mailbag
Today, more feedback on Doug’s recent essay on anarchy and voluntaryism:
Sir, this was very good, with the exception of your statements that you are a libertarian (a form of government) and that you could live with a certain kind of government. The only government that would work is an altruistic dictatorship, and the problem with that is eventually that leader would die.
Fifty-six rich landowners didn't like paying taxes to England, so they hired a bunch of Scots/Irishmen and started a revolution. This government was corrupt the day it was started and has only gotten worse. But just like the 97% of people then who didn't want to get involved, the same holds true today. Anyway, I enjoyed your article.
– Robert
The article is spot-on. Just one suggestion. You state that you are an anarchist and that you "don’t believe in the right of the State to exist." But later in the article you state, “It implies a police force to protect you from coercion within its boundaries, an army to protect you from coercion from outsiders, and a court system to allow you to adjudicate disputes without resorting to coercion. I could live happily with a government that did just those things." Those thoughts are in opposition to each other. The first statement is anarchism, the second is not. Please reconsider your logic and conclusions. You can't have it both ways.
– Wayne
Readers also respond to Tuesday’s Dispatch, “Get Ready for a Seven-Year Bear Market”:
My friend, you are totally correct. We live in Irapuato, Mexico and see the same as you. We moved here because it was affordable, but as the dollar keeps heading south, what’s next?
– Steven
It’s no surprise that you’ve mentioned Tulum in every message since you’ve been there! I enjoyed it in 2000!
– Tom
And one eagle-eyed reader had a correction:
Your calculation of the dollar/peso falling this year by 7% is incorrect. A fall from 19.50 to 18.75 versus dollar is a tad less than 4%. (Not 7%.)
– Alexander
Good catch, Alexander. While the dollar is down 7% against the peso peak to trough, it’s down only 4% over the past year overall. This has since been corrected.
As always, please send any questions or comments right here.