Two Currencies, Two Crises

Kat Von Rohr (February 25, 2010)

(And How to Short Both in the Coming Months)

It’s like the two biggest Mob bosses are on trial at the same time.

For the first time in history, the two largest, most influential currencies in the world are both experiencing crises at once…

The dollar and the euro.

Now that may sound a little strange. We all know the euro tends to move in the opposite direction from the dollar. So if the dollar falls, the euro rises and vice versa.

But it’s really just a question of timing…

A Crisis for Every Season

As I explained yesterday, the dollar has been on a steady decline in purchasing power terms for the last decade. So even if the dollar rallied briefly in the Forex market, it was still losing value.
Long-term, the dollar is the cautionary tale currency that MBAs will be studying decades from now. (please link to yesterday’s)

Meanwhile, the euro is smack dab in the middle of its worst crisis since the euro started trading 10 years ago. Never in its short history has this mega-currency been so mocked, beaten and bruised by currency traders.

The reason? The EU’s problem children including Greece, Spain, and Portugal are flooded with debt. That debt is threatening to drown the euro.

So short-term, the euro is the big crisis to watch, while the dollar is the more sinister crisis that is quietly picking the pocket over the long-term. More on that in a moment…

First, I’m on the scene at our huge FX University event in Scottsdale, Arizona this week.

The event officially kicks off this afternoon. Then for the next three days, I’ll be sitting in on over 25 different currency presentations from leading currency experts. As promised, I’ll be reporting back to you as much as I possibly can.

Frankly, we couldn’t have picked a more critical time in history to hold this three-day currency event.

The two biggest currencies in the world are suffering. As a FX University reader, you already know if a currency is in trouble, there are plenty of ways to profit…

As a Currency Investor, You’re in the
Best Position to Cash in on Crisis

For decades, currency traders have proven time and again that any crisis is just another chance to profit. For example…

In 1994, short-sellers made a killing when the Mexican government decided to devalue the Mexican peso. Anyone shorting the peso made a quick double-digit gain overnight.

In 1998, exotic traders cashed in on the Asian crisis, when problems in Thailand echoed throughout the rest of Asia. Again, anyone shorting the Thai baht got a nice payday for paying attention to the news.

In 2008, the credit crunch ripped through the entire market universe. Exotic currencies took a bath, while the dollar enjoyed a nice short-term rally. When that happened, I know exotic traders who made a killing simply shorting exotic currencies vs. the buck.

This profit phenomenon happens in currencies more than any other market because currencies are all relative assets. If one currency is crashing, another currency must be rising somewhere in the market at the same time. Pair them together, and you will always have a currency to short and buy for maximum profits.

The Euro May Be Sick, But the Dollar Is Dying

Back to the present…

The dollar has been rallying since currency traders decided to punish the euro. Even though long-term the dollar has its own crisis to face, traders all over the globe still consider the dollar the best flight to safety currency when markets fall apart.

Frankly, it doesn’t make a lot of sense considering the dollar is just as sick in the long-run. But traders are just reacting to what the markets give them. Right now, that’s dollar strength and euro weakness.

But again, it’s all a question of timing.

In the short-term, every single trader around the world is stalking the news. They’re waiting and watching to see if anyone will rescue the EU’s deadbeat nation, Greece.

Now Greece desperately needs a bailout otherwise the country is in danger of defaulting on its sovereign debt. That’s a black mark of shame for any country. But even if Germany or the ECB bails out Greece, it will still likely harm the euro in the coming months. (By the way, my colleague Eric Roseman will be speaking about the issue of sovereign defaults later today at FX University.)

Meanwhile, the U.S. is flat-out broke.

Long-term the U.S. dollar will have to pay for that $12 trillion in debt that we currently have on the books. Sadly, that debt doesn’t even include off-the-book liabilities like Social Security and Medicare – a HUGE chunk of debt that would make the guys from Enron blush.

The sad truth is our government has been betting your future on the dollar’s world reserve currency status. For years, politicians have been using the dollar as their own personal ATM to pay for all kinds of government initiatives. They also have been exporting inflation, by printing cheap dollars and trading them for cheap goods overseas.

But this system will only work as long as we hold the world’s reserve currency. In the last year, leaders from the UN, China, Russia, France and other nations have all publicly announced why the dollar does NOT deserve its status as the world reserve currency anymore.

Also, historically, world reserve currencies only last 70 years or so anyway. After that, another currency always takes its place. The dollar is about to hit that 70-year mark. In other words, the dollar’s golden age is coming a close. When it does, the dollar will plummet. It’s only a matter of time.

(Again, my friend Chuck Butler will be giving his greatest defense against this dying dollar this afternoon to kick off FX University.)

Enough with the Issues, Let’s Get to the Solution

As I mentioned before, there are plenty of strategies you can use to play both the dollar and euro crises in the currency markets.

Personally, I would use any short-term dollar weakness and start buying foreign currencies for the long-run. Also, you can always pad any dollar-based account with gold to protect your holdings. In the FX market, I know of at least a half dozen different ways to cash in on this short-term euro crisis.

This week, my currency colleagues at FX University are explaining how to do just that. Chuck Butler, Ashish Advani, Sean Hyman, Evaldo Albuquerque and others are all here in Scottsdale, AZ at the stunning Fairmont hotel to reveal how to short the best currencies for double or triple-digit gains, how to shield your long-term dollar assets, and cash in on these short-term EU crisis moves in the Forex market.

The event officially kicks off this afternoon. I’ll be there to report on as many currency secrets, strategies, and FX plays as I possibly can here in FX University Daily.

For more details, please be sure to check out my articles both tomorrow and Monday.

Your Chance to Hear It All…

I wish I could tell you everything that’s happening at the event this week. But with over 25 presentations in the next two and a half days, I simply don’t have the space here in FX University Daily.

Fortunately, we have audio-visual experts who are setting up in the conference room as I speak.

They will be both audiotaping and videotaping this event, so you can catch every single euro or dollar play revealed here at FX University this week in our FX University Video and Audio Series.

As a loyal Currency Capitalist reader, I want to offer you a special discount on this series. For this weekend only, you can pre-order the FX University Video and Audio Series (a $149 value!) for a special conference price of only $99.

You’ll receive video of some of the presentations, and audio of all the speakers presenting here at FX University this week. You’ll also receive every PowerPoint presentation that our speakers present this week so you can follow along.

To recap, you’ll receive…

  • Online video of your favorite speakers here at FX University including all the writers you read here every week in FX University Daily.
  • The entire FX University Audio Series with every Forex strategy caught on tape (a $149 value)
  • All our speaker’s PowerPoint presentations.

For only $99. You can sign up right here.

Again, make sure to tune in tomorrow for the latest from FX University.

Till then – Good Currency Investing!
Kat Von Rohr, Managing Editor
FX University Daily

P.S. Just FYI, this offer is only good through the end of the conference. After this weekend, the price shoots up to the rack rate of $149. So don’t wait, click here for details on how to pre-order now.

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