Hey There Income Hunters,
This past weekend I drove down to Naples, Fla., to visit my daughter and some of her friends.
We played cards outside for about six hours — and it was hot.
I, however, was ice cold.
The game was a $1 dollar ante and I lost $140!
Pretty big drop in purchasing power!
On the drive back to Tampa, I was listening to a podcast about how we’ll know when the dollar is about to go into free fall. That got me thinking about the signposts to look for.
Consider this …
Each of our two major dollar bear markets were preceded by:
- Asset price inflation while corporate profits remained flat.
- A bursting of the bubble that led to massive dollar printing.
- That weakened the dollar and then lifted corporate profits as foreign demand for goods picked up.
- Once the economy picked up, interest rates were hiked and the dollar recovered.
Dollar Bills, Y’all
I always bring up the day Nixon uncoupled the dollar from Gold as being one of the worst blunders in American history.
It should have been the end of the dollar as a global reserve currency
Why wasn’t it?
Well, to begin with, we were just a middleman between foreign paper currency and gold…
Dollars for gold was great with our trading partners …
However, once we blew it by printing more dollars, we had to find a way to remain as the middleman or dollars and bonds would become worthless …
With their backs against the wall, the Washington gang found a way and they certainly had the will.
It was a tactical plan like no other …
Henry Kissinger, then the U.S. Secretary of State, went to the Saudis and offered military weapons and guaranteed protection for their oil fields and from Israel …
What did America get in return?
- The Saudis had to agree to price all of their oil sales in U.S. dollars only … and refuse all other currencies except dollars for oil…
- The Saudis would agree to invest a portion of their surplus oil proceeds in U.S. debt securities.
This was the “new” petrodollar system. By 1975, all of OPEC agreed to the same deal.
Why today’s dollar decline really is different…
- In the 1980s, as the U.S. became a financialized economy and a debtor nation, foreign demand for dollars declined …
- Because of the size of our debt, the Fed can no longer raise rates to attract foreign capital into dollars …
- The digital yuan now offers many of the importers and exporters of Oil an alternative to dollars …
No Pain, No Gain … A Weaker Dollar Puts us Back in the Trading Game
Apple had a great announcement yesterday, unveiling plans to invest a half-trillion throughout America while adding thousands of high-paying jobs.
The U.S. will be back and a weaker dollar is our ONLY solution this time — no more deals.
Let’s get back to the future and become an innovative, manufacturing powerhouse again …
But this time there are no devastated and broken down developed countries like after WWII …
It will be a global manufacturing and technological revolution …
So, what is the best investment to survive the transition and benefit from the massive worldwide demand for green energy?
You probably guessed, it’s silver … which is a two-headed economic beast.
Silver can benefit massively in two ways…
- Industrial demand for green energy includes solar panels and electric cars that both use massive amounts of the precious metal.
- In the new world of digital currencies, competition will be intense and weaker countries will back their digital currency with silver and gold to strengthen their hand on the global trading stage.
Now, since this is a 3-5 year trade, we can take advantage of the leverage and added performance from silver miners …
First, check out the SLV/SPY ratio …
A weaker dollar will eventually lead to higher prices and a decline in financial paper assets …
Certain stocks will keep up with inflation while, broadly speaking, stocks and bonds will decline in value.
The Lowest Risk/Highest Return Silver & Gold Royalty Company
I’m talking about a company with …
- Low-cost mining assets
- Diversified assets across several geographies
- Plenty of working capital for further growth
- An inexpensive price relative to competition
And that company is Sandstorm Gold (Ticker: SAND).
It’s an ideal time to invest as traders can buy long-term calls and sell short-term calls to gain additional income …
The conservative play is to wait for the break above the 200-day moving average.
I purchased Jan 2023 7-strike calls for $2.50. I think SAND will be above $25 by then …
As SAND approaches resistance at $8.75, I am going to sell calls and repeat that process. In six months you can easily own the calls for free.
Bring It Home
I continue to build confidence in the path forward. I would like to get through May and June when we will see higher inflation rates, which could send interest rates higher…
I think commodities and the metals will weather that storm and then it will be clear sailing…
I appreciate all your comments. Please let me know your thoughts on the dollar and as always …
Live and Trade With Passion My Friends,