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By Louis Basenese

I'm no stranger to controversial stock market predictions. In fact, a few weeks ago I angered an entire room of investors at the Agora Financial Symposium with my latest trio of "crazy" recommendations…

  • "Take profits on your gold, while the getting's good." 
    Since uttering those words, the yellow metal's dropped $108, or roughly 12%.

  • "Get short oil. It's going to $100 before it touches $150."
    And oil obliged by dropping to $113, a move that silenced everyone who was calling for $200 oil just weeks ago.

  • "And do the unthinkable. Get long the U.S. dollar versus the euro."
    Last Friday, the euro endured its worst single-day slide in eight years, breaking through a key technical support level at $1.50.

Bullish Dollar Predictions

Now, before you cry "foul," I'll confess… I did issue similar bullish dollar predictions here on two occasions (The End of the Weak Dollar and Weak Dollar Rising). And I know they weren't well received because my inbox immediately filled up with "positive" reinforcement. Such as…

  • "I would stick your dollar where the sun don't shine."
  • "I'm still questioning your intelligence."
  • "I really am amazed that people who are so well educated could be so ignorant… to send out a newsletter saying how the weak dollar is looking up is very irresponsible."

And yes, I kept every one of them in hopes of eventually being vindicated. But that's not why I'm writing today. Gloating doesn't put money into my portfolio. Only successful investments do.

Instead, I'm writing to make one last appeal for you to consider initiating a long dollar/short euro position, before it's too late…

4 Great Investors Badmouthing the Dollar…

Recall in March everyone, including four of the greatest investors of all time (with much more experience than me) - Warren Buffett, Jim Rogers, Bill Gross and George Soros - were publicly badmouthing the dollar. By June, Soros changed his mind, mostly. He went from being a dollar bear to neutral. A sentiment change is afoot…

And after last Friday's move, the dollar bull officially charged off the endangered species list. Here are a just a few sightings, culled from recent articles in the financial press…

  • "The U.S. [dollar] multi-year down trend is over." - Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

  • "Since reaching an all-time low against the major currencies in mid-March, the U.S. dollar has climbed 6%… The currency has seen several larger, temporary gains during its 38% slide since 2002, but this one could have legs."  - Sal Guatieri, economist at BMO Capital Markets.

  • "The dollar's surge against the euro has prompted Bank of America Corp. to tell its customers to exit trades betting on more gains." Bloomberg.com, August 14, 2008.

Trust me when I say there are countless others. Instead of listing them all, I think it's more important to understand the three factors prompting the sudden and massive conversions.

  • First, investors finally woke up to the decoupling farce. Just like the United States, the rest of the world (at least this time around) is staring down the double-whammy of slowing growth and rising inflation. That includes Europe and (gasp) China. In fact, going into today, the U.S. markets were performing better than all of the highly touted BRIC-countries, year-to-date. In a truly decoupled world, that wouldn't be happening.

  • Second, the latest reading of the Economist's Big Mac Index confirmed the euro is grossly overvalued, by as much as 50% versus the U.S. dollar. The most it has ever been.

  • For the skeptics in the bunch, here's one more point to chew on… It's a fact the dollar moves in five to seven year cycles. It's a fact the dollar's already endured a six-year drubbing. So odds are the latest rally marks a legitimate reversal. And that means the euro is in store for an epic tumble.

So instead of merely daydreaming about the return of an affordable European vacation, I encourage you to do something that will actually help you afford it!

Stock Market Predictions - Get Long The U.S. Dollar

Here's a stock market prediction - get long the U.S. dollar versus the euro. (See the Investment U Crib Sheet for two ideas.)

And I know. I've insisted on the same move twice before. But as one of you put it, my prognosis was just "a bit premature. [The dollar] will get much worse before it gets better."

It did. The euro hit an all-time high of $1.6038 on July 15. But now it's at a five-and-a-half-month low… with a long way to go.

Remember, if you're early, there's still time to get it right. But if you're late, there's only time for regrets. Here's to investing with no regrets.

Source: Market Predictions: 'Crazy' About the Dollar