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Steve's note: In the November 19 issue of my True Wealth newsletter, I recommended betting on a rise in the dollar and a fall in the euro. In today's DailyWealth, my friend Jeff Clark explains why the dollar will rise in a crisis, in the simplest possible terms... Why I Still Like the Dollar in a CrisisBy
Tuesday, November 30, 2010
"Where the heck is our emergency cash?" I asked, looking squarely at my wife...
The mountain of $20 bills I stashed away last year was now nothing more than a mole-hill.
"I needed the cash when the girls and I went to New York last month," she confessed, "and I didn't have time to get to the bank."
"But what if there was an emergency?" my kids gasped in unison. The look on their faces was sheer anguish. And it was priceless.
Even 8- and 10-year-old kids know you need cash in times of crisis. You need dollars.
Gold is nice, too. It's a store of wealth, a sleep-tight investment that'll come in handy when Armageddon arrives. But for crises that are somewhat less Armageddon-ish, dollars are more useful.
Think about it...
When terrorists flew planes into the World Trade Center, the dollar rallied 8% in six weeks.
When Lehman Brothers went belly-up, and the U.S. banking system was on the verge of imploding, the dollar jumped 10% in 10 weeks.
And last May, when a few algorithmic programs made computer trading go nuts on the New York Stock Exchange – resulting in a 1,000-point drop and recovery in the Dow in 15 minutes – it sparked an 8% rally in the dollar over the following six weeks.
How did gold do during those times? I don't know... I didn't check.
All I know is I've never had a problem exchanging dollars for any sort of goods or services. It didn't matter where in the world I was at the time. If I needed help, a greasy palm full of greenbacks always did the trick.
Of course, I understand the problem of fiat currencies. The folks in charge of the printing presses go nuts and purchasing power is destroyed. I get it.
But until Safeway is willing to exchange a basket full of groceries for my MS65 Saint-Gaudens gold coins, I'll keep a stash of $20 bills in my survival kit.
My point is... in times of crisis, when investors need liquidity, the world flocks to the dollar. That has always been the case. And, at least until Armageddon arrives, it will continue to be the case.
So in times of crisis... in times of emergency... I want to own dollars. You should, too.
Good investing,
Jeff Clark
Further Reading:
Jeff is always well-prepared in case of an emergency. "You used to be 'paranoid' if you ... stashed a large pile of cash under your mattress," he writes. "Now, however, you're nuts if you don't." Learn Jeff's ideas for surviving the next disaster here: Your Survival Depends on This.
Market NotesTHE WORLD'S BIGGEST TREND In today's chart, we revisit our huge "Asia up, the West not so much" idea. As you'll see, our thesis is growing stronger by the month...
The long-term case for owning Asian assets versus U.S. and Western European assets is simple. Over the past 40 years, the Western world has cooked up a hellish stew of unfunded welfare programs, huge government debts, and populations who've adopted the "something for nothing" way of life. This produces a headwind for stock and property prices.
Asia isn't burdened with the "welfare state of mind." Most Asians are poor... but they're working and saving like crazy to catch up with the rich Westerners they see on TV and YouTube. This produces a tailwind for stock and property prices.
Today's chart shows this trend in the form of a ratio. The ratio is Asian stocks (represented by the Singapore ETF) plotted against "old Europe" stocks (represented by the Italy ETF). A rising trendline shows Asia outperforming old Europe. As you can see, the latest round of European bailouts has helped this ratio of "Asia up, the West not so much" reach an all-time high. The next round of the European crisis will send it even higher...
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