Hyperinflation is the elixir of gold bugs and dollar bears.
And since we think hyperinflation is the LEAST of our concernrns, we’ve been a proponent of buying the U.S. dollar ever since 2011.
At times, it’s been an unpopular view. Yet deflation – not inflation or hyperinflation – remains central to our macroeconomic view.
We hold two bullish U.S. dollar positions in the Boom & Bust model portfolio. One is a bet on the U.S. dollar in general. The other takes the form of a bet against a non-dollar currency (this one has racked up gains of more than 50% already!).
So it’s safe to say we “put our money where our mouth is.”
Today, you too have the chance to scoop up a bullish U.S. dollar position that’s selling at a discount. Here’s a chart showing U.S. dollar futures going back to mid-2012.
As you can see, the 81 level (marked in red) acted as resistance, keeping a lid on the dollar’s gains in 2012.
But this year, the dollar broke above this level, and now it’s acting as support (marked in green). We’ve tested 81, to the downside, three times now. Each time it’s held… suggesting we could soon see a surge higher in the dollar.
If that unfolds, we could see rapid-fire gains.
One catalyst for a rising dollar is risk, as investors gravitate to the relative safety of the greenback. Many expect September to be a month laden with event risk, from a debt ceiling debate, to the Fed’s possible taper… and now the conflict in Syria is heating up.
The U.S. dollar is a natural risk-off hedge. With prices now depressed, it’s as good a time as any to buy a little protection in the form of bullish U.S. dollar exposure.