U.S. Dollar: The Trade of the Decade

Includes: DIA, QQQ, SPY, UDN, UUP
by: Mark Caffee

It's official. The greenback is back!

Why would I say that when everyone is calling for its collapse? I mean after Helicopter Ben all but sent the greenback over the edge by cutting the fed funds rate to zero, why would anyone own anything but gold?

The U.S. dollar has been in steady decline since the mid-eighties. And the U.S. currency has been cratering since 2:15 EST on Tuesday, December 16th. Everyone expects the Federal Reserve and Treasury to print the economy out of recession, but this is where I get off the bus. Sometimes the most obvious trades are the most dangerous, and this is a very crowded trade. Commodities and bank stocks are both getting plowed under. If printing money was in play, can someone explain the carnage in commodities?

What about that decoupling trade? You know, the China and India growth story? This will be the decade we find out that we all are very coupled together. Deleveraging is synonymous with deflation, and credit does equal money.

The truth of the matter is that Uncle Ben is the buyer of last resort. But by my simple calculations, he likes to buy on the cheap. This is not a runaway train at all, but a very calculated, systematic and coordinated reversal of a twenty year down cycle in the dollar. Contrary to many experts, the Treasury is NOT highlighting a risk trade. Whatever the Bernanke Fed buys will appreciate in value, and you can take that to the central bank!

The U.S. dollar is taking its spot as the reserve currency. America is coming back riding on the greenback. Many pundits have written off America and its currency, but I challenge everyone to buy the pullback in the dollar.

Has anyone ask Hank Paulson if the U.S. has a strong dollar policy lately? Why? It's obvious, isn't it.....or is it? America is the biggest bargain in the world. And we are going to see commodities under serious pressure for ten years. People will laugh at oil projections of $200-500 a barrel. America is moving into a savings mode, and the rest of the world is going to learn just how coupled they were with the U.S. We are embarking on a new world of alternative energy programs the world will envy. Shock and awe will be the mantra for green technologies. And making do with less will be the new cool trend. Our markets will remain open, but we won't be buying trinkets from Asia or oil from the Middle East. We will be buying all things, which make our lives productive.

America, the beautiful, your turn to shine is at hand. The U.S. dollar, front and center, will be the beacon of financial integrity. The rogue entities will be rooted out and destroyed. The cleansing has begun, and America is on the mend. The rumor of America's demise has been greatly exaggerated, and the U.S. dollar will reflect the imagination and heart of America. The UUP and SPY will be excellent decade long trades.

Disclosure: no positions in UUP or SPY