• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 10 mins GREEN NEW DEAL = BLIZZARD OF LIES
  • 2 days Does Toyota Know Something That We Don’t?
  • 5 days OPINION: Putin’s Genocidal Myth A scholarly treatise on the thousands of years of Ukrainian history. RCW
  • 2 days World could get rid of Putin and Russia but nobody is bold enough
  • 20 hours America should go after China but it should be done in a wise way.
  • 5 days CHINA Economy IMPLODING - Fastest Price Fall in 14 Years & Stock Market Crashes to 5 Year Low
  • 4 days China is using Chinese Names of Cities on their Border with Russia.
  • 5 days Russian Officials Voice Concerns About Chinese-Funded Rail Line
  • 4 days CHINA Economy Disaster - Employee Shortages, Retirement Age, Birth Rate & Ageing Population
  • 5 days Putin and Xi Bet on the Global South
  • 5 days "(Another) Putin Critic 'Falls' Out Of Window, Dies"
  • 6 days United States LNG Exports Reach Third Place
  • 6 days Biden's $2 trillion Plan for Insfrastructure and Jobs
  • 10 days huge-deposit-of-natural-hydrogen-gas-detected-deep-in-albanian-mine
Is Beijing Losing Control Of Its Economy?

Is Beijing Losing Control Of Its Economy?

China's slowing economy is raising…

Freight Broker Bankruptcies Loom As Debt Woes Persist

Freight Broker Bankruptcies Loom As Debt Woes Persist

Convoy's shutdown highlights liquidity issues…

Economic Momentum Wanes in Eurozone as Borrowing Costs Soar

Economic Momentum Wanes in Eurozone as Borrowing Costs Soar

The European Commission has revised…

Mad Hedge Fund Trader

Mad Hedge Fund Trader

John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets.…

More Info

Premium Content

Enjoy the Dollar Rally While it Lasts

Any trader will tell you the trend is your friend, and the overwhelming direction for the US dollar for the last 220 years has been down.

Our first Treasury Secretary, Alexander Hamilton, found himself constantly embroiled in sex scandals. Take a ten dollar bill out of your wallet and you're looking at a world class swordsman of the first order. When he wasn't fighting scandalous accusations in the press and the courts, he spent much of his six years in office orchestrating a rescue of our new currency, the US dollar.

Winning the Revolutionary War bankrupted the young United States, draining it of resources and leaving it with huge debts. Hamilton settled many of these by giving creditors notes exchangeable for then worthless Indian land west of the Appalachians. As soon as the ink was dry on these promissory notes, they traded in the secondary market for as low as 25% of face value, beginning a centuries-long government tradition of stiffing its lenders, a practice that continues to this day. My unfortunate ancestors took him up on his offer, the end result being that I am now writing this letter to you from California--and am part Indian.

It all ended in tears for Hamilton, who, misjudging former Vice President Aaron Burr's intentions in a New Jersey duel, ended up with a bullet in his back that severed his spinal cord. Cheney, eat your heart out.

Since Bloomberg machines weren't around in 1790, we had to rely on alternative valuation measures for the dollar then, like purchasing power parity, and the value of goods priced in gold. A chart of this data shows an undeniable permanent downtrend, which greatly accelerates after 1933 when FDR banned private ownership of gold and devalued the dollar.

Today, going short the currency of the world's largest borrower, running the greatest trade and current account deficits in history, with a diminishing long-term growth rate is a no-brainer. But once it became every hedge fund trader's free lunch, and positions became so lopsided against the buck, a reversal was inevitable. We seem to be solidly in one of those periodic corrections, which began with the big "RISK OFF" trade on April 29, and could continue for months or years.

The euro has its own particular problems, with the cost of a generous social safety net sending EC budget deficits careening. Use this strength in the greenback to scale into core long positions in the currencies of countries that are major commodity exporters, boast rising trade and current account surpluses, and possess small consuming populations. I'm talking about the Canadian dollar (FXC), the Australian dollar (FXA), and the New Zealand dollar (BNZ) - all of which will eventually hit parity with the greenback. Think of these as emerging markets where they speak English, best played through the local currencies. For a sleeper, buy the Chinese Yuan ETF (CYB) for your back book. A major revaluation by the Middle Kingdom is just a matter of time.

I'm sure that if Alexander Hamilton were alive today, he would counsel our modern Treasury Secretary, Tim Geithner, to talk the dollar up, but to do everything he could to undermine the buck behind the scenes, thus over time depreciating our national debt down to nothing through a stealth devaluation. Given Geithner's performance so far, I'd say he studied his history well. Hamilton must be smiling from the grave.

By. The Mad Hedge Fund Trader

ADVERTISEMENT

US Dollar Index


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • Anonymous on December 28 2010 said:
    I think that the PIIGS are in deep strife in 2011. Alot of people think we are doomed, but there are still great ways to make money.I subscribe to the FFT newsletter at http://www.forecastfortomorrow.com that guy is calling for a bigger event to come in the next few months. His oil calls are insane, and I have been making good money with that.Start stocking up on gold people!! Do it yesterday.

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News