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The U.S. Dollar Continues To Head Lower!

I remember in the early days when I didn't know anything about the currency market, I would hear about the dollar going down and I wondered why that should even matter to me. After all, I didn't "invest" in dollars, nor did I buy goods directly from foreign countries and I didn't travel outside of

the U.S.

However, I quickly realized that it should matter to me and it DOES affect me even if I didn't invest in dollars, buy foreign goods from foreign countries or travel outside of the U.S. Why?

When the dollar goes down, we lose purchasing power and our costs of living go up. Inflation rises as the dollar falls...and that can affect anyone greatly! It's one reason why I invest in commodity-stocks because they help offset those rising costs.

You see, when the dollar goes down...it's like you're earning less money per year even if you're earning the same amount as last year (because your costs have gone up). I bring this up now because the dollar has been falling all year, and it could be about to get worse. Let's take a look.

In the chart of the U.S. Dollar Index (which tracks the dollar vs. a basket of six other major currencies), we see that the dollar has continued to break down, blowing through its green uptrend line, it's blue 50-week moving average and now it's threatening to fall below its 200-week moving average.

Additionally, the RSI and MACD continue to lose momentum which is another bearish sign.

Also, another thing to remember is that the dollar's decline was blamed for sparking the stock market crash of 1987. So as stocks dip and foreigners leave our market and the dollar continues to decline, it could ag on another stock market correction once again.

It's another reason why I've encouraged you to hold large cash positions instead of being in the broader stock market and to be in value stocks and defensive assets, like my first portfolio pick.

Those of you who subscribed to my former newsletters hold value stocks, many of which are commodity-stocks that should do well in an environment of rising inflation and a falling dollar.

God bless!

You've been saying since I started following you in 2014 that we should be in the commodities and I still have most of the portfolio in commodities that you recommended since then as your thoughts and explanations have been crystal clear over that time period. God Bless!


Thanks. I appreciate that. Yes, they've been the pocket of value to be in and those stocks were the ones to average down on and they're the ones rising now. The system works. It just requires us having faith and patience in the system. It's great to hear from you. I'm glad you're with me here.

With a reduction of corporate and small business taxes on the way shouldn't the dollar be rising due to the stimulus? What factors do you think are driving the dollar lower?

It's never that isolated. That's what makes currency trading/investing somewhat difficult is that there are a myriad of factors that factor into it not only in the U.S. but also in the world. For instance, sometimes if other countries currencies look more appealing, fundamentally or technically, then the dollar can be victim to being the ugly house in a great neighborhood. But interest rates, GDP, inflation, employment, money flows in and out of the country, etc. all also play into the dollar's rise or fall.

Right now, many foreign currencies are firming up against the dollar (which hasn't happened in years). So they're likely undervalued relative to it. Also we've got an overvalued stock market especially relative to much of the rest of the world's stock markets. So smart institutional money is exiting the U.S. and heading to those markets. As they do, that takes the dollar lower and foreign currencies higher as there's an outflow out of the U.S. and an inflow of money into these other markets.