Dollar Rally Is a Fake - Stick to Healthcare and Oil

Quite frankly I'm getting a bit annoyed at those who are claiming the dollar rally is real. Anyone who is remotely familiar with asset price movements knows that even the biggest declines are eventually met with corrections, just like soaring oil is correcting. You'll recall I mentioned the likelihood of a 30% to 40% correction when oil was making its highs so the sell-off is not at all surprising. The key thing to focus on is the long-term trend. Until it changes you need to understand that the dollar is headed for new lows. I cannot say when. But I will guarantee you it is unless there are significant fundamental changes, which would take several years of very aggressive domestic and foreign economic reform.

Keep in mind that the weakness in the dollar is a reflection of the inherent weakness in the US economy. The dollar is the tail of the economy. And as we know, the tail does not wag the dog unless you live in la-la land like so many in Washington. So for those of you who seem to think that a strong dollar will strengthen the economy you are wrong. Only a strong economy will strengthen the dollar. I'm talking about a truly strong economy; one that creates high-quality jobs in America, not overseas; one that leads to surpluses instead of deficits, and one that leads to affordable basic necessities. In fact, the only strength in the economy has been due to a weak dollar which has boosted exports.

Once again, if you dare venture into the US stock market, I advise you stick to healthcare and oil. I like United Health (UNH) (recently sold and waiting for the pullback to bottom) and Pfizer (PFE).

As for oil, I advise you to stick with the oil trusts (PGH, PWE). Although valuations for many explorers are starting to become attractive (PBR and SU), I would wait for some really compelling sell-offs prior to taking positions. In contrast, it's a great time to enter (or reenter) positions in some of these trusts. If you want an idea where oil is ultimately headed, ask God. Anyone who claims they know for certain is either an idiot or lying. For whatever it's worth, I made some forecasts a month ago, which show probabilities for each price ranges. Of course there are always a few other names in other industries that will have very compelling valuations, but my call on healthcare and oil is for passive investors.

If I turn out to be right, the smart money is gearing up to short the dollar again and buy oil… not now, but soon. As well, they are waiting for compelling buy signals for gold and silver. For now, the GSE bailout is sure to force both down. The suckers have been loading up on the dollar. What they fail to realize is that the real dollar crisis has yet to occur.

Disclosure: Long PFE