Is the Dollar Rally Over Now?

 |  Includes: SLV, UDN, UUP
by: Henrique Simoes

I was surprised by the comments of a man I think is an intelligent and savvy investor. Hugh Hendry, the contrarian British investor said yesterday that "I can`t buy enough dollars" when citing his dollar bullishness. This comment caught my eye. He is not only bullish on the dollar but shorting precious metals, "Gold, silver, I'm shorting them right now. (Inflation) is coming back in the future. All I'm saying it is just an unprofitable proposition at the time".

That completely contradicts my views on the dollar. I agree with Peter Schiff when he says that the US Dollar is a subprime currency and with Jim Rogers's bearish comments on the dollar, referring to it as a terribly flawed currency.

All these Government efforts to sort this financial and economic crisis will only fuel inflation. That will be the only effects of the Stimulus Package and all the TALF`s, TARP`s and banking rescue plans.

The only viable solution for paying back the US debt is to monetize it. In other words, pay it back in worthless dollars. The printing presses are already running at full speed and that will be seen in the value of the dollar in the near future. More dollars chasing the same goods and services can only result in a depreciation of the dollar's purchasing power.

How can we profit from this? Almost all governments around the world are following similar policies to a certain extent, but currencies like the Swiss Franc should do much better than the US Dollar. Another alternative is to buy hard assets as silver or industrial commodities. Marc Faber recently said that industrial commodities are very cheap. Things like copper or zinc might also be an interesting investment going forward.

I think the dollar will make news lows against other major currencies in 2010. When will the dollar bear market begin? I don`t know, but if had a gun pointed to my head I would say in the near future it has not yet started.

Disclosure: Long SLV.