The U.S. dollar has been one of the world's strongest currencies in the first part of 2010.
And it's no wonder. The Greek debt crisis continues to threaten Europe's overall health, and could unleash an entirely new contagion on the rest of the global economy. Then there's China, - the engine of world growth during much of the financial crisis - which now appears to face the near-term triple threat of slowing growth, accelerating inflation and workplace unrest. Add in concerns about commodity prices and global debt levels and it's easy to see why currency investors have sought the safe haven of the U.S. dollar.
But is the greenback really the best choice for safety, quality and security?
To me, the dollar is looking more and more like a colossal short that could wind up being one of the biggest moneymakers of the year for traders gutsy enough to take a stand.
Read on to find out why it's time to bet against the dollar... I'll show you the best ways to do it.
Given that the dollar soared 11% since the beginning of the year, I'm sure some experts will call me crazy for going against the dollar at this point in history. But here's my thinking:
It's worth noting here that this wager against the U.S. dollar should be viewed for just what it is - a highly speculative trade. This means it's only for aggressive traders.
Keep in mind, too, that the dollar won't shed its reputation as the currency of last resort without a struggle. Negative events abroad could send investors back into the currency for short stretches, making the dollar prone to short, rapid increases in value, despite its highly flawed underpinnings.
Position traders and everyday investors will probably want to wait for confirmation that the dollar's trend is, indeed, reversing. You'll miss out on some returns but that's the way the game is played - you have to act on your convictions or else you're simply another wannabe in this business.
My suggestion is that any speculative trade be limited to 2% of investable capital. That way, if we're wrong and the dollar doesn't cooperate, the risk to your portfolio is minimized.
As for suitable ways to play this dour-dollar prediction, I can think of three:
Editor's Note: Of course, there is one other way to protect your portfolio from inflation. Gold Dollars. Using a secure transaction from your own computer that takes just minutes, you can convert your dying dollars into U.S. Treasury-approved "gold dollars." Use them as you would regular cash - except as the price of gold goes up, you'll be able to buy more with 1 "gold dollar" than you could with an old George Washington! It's so simple; we'll tell you how to do it for free. Just go here.