- Buy Rydex Weakening Dollar 2x Strategy (RYWDX).

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Buy Rydex Weakening Dollar 2x Strategy (RYWDX).

Market Watch

Two months ago, the yen was at 123 to the dollar. On Friday it climbed to 111. Currency volatility has doubled since June and taken out the time-tested strategy of the “Yen carry trade.”
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Buy Rydex Weakening Dollar 2x Strategy (RYWDX).

Wednesday, 06 August 2008

By Charles Delvalle
With some currency traders expecting the Fed to push rates higher to combat inflation, the dollar has seen recent strength. But will that strength last long enough to reverse the multi-year long dollar downtrend?
It’s highly unlikely.

Since March, The U.S. Dollar Index (NYBOT: DX) has been consolidating between the 70 and 74 cent range. Since mid-July the dollar has mounted a strong rise to the top of this range. But with the continued risk of more foreclosures, multi-billion dollar losses in the financial sector, ballooning deficits and a sluggish economy, the dollar will have a hard time finding traction for a long-term move.

Strong rallies in the dollar should be seen as an opportunity to take a bearish position. Of course you can do that through ownership of gold and silver, precious metals ETFs and mining stocks.

You can also play the falling dollar in the FOREX markets, if you have the experience and risk tolerance to do so. But a safer and quicker way is to buy the Rydex Weakening Dollar 2x Strategy (RYWDX). This fund increases in value by 2 percent for every 1 percent decrease in the dollar index.
Rick Rule of Global Resource Investments drew a crowd, as usual, on and off the podium. He came across as downright gleeful over the presently declining resource stock prices. The “juniors” are down approximately 35 percent over the last 12 months. Rule loves buying into declines. Much of the risk has been hammered out of the sector.

In typical wittiness he stated that the markets are taking down the good, the bad and the ugly. We are not required to buy the bad or the ugly.

Rule also highlighted four main reasons the resource bull market has a long way to go:

   1. Most global commodities are priced in US dollars. They go up in price in proportion to ongoing dollar weakness.
   2. We aren’t long out of a 20 year bear market in natural resources. Worldwide investments in the resource sector were severely lacking during this time frame. We’re living off mining assets discovered 20 to 40 years ago.
   3. Emerging market demand for “things” containing various metals has become the prime factor behind global demand. It is no longer just about Western demand.
   4. Government attempts to “fix” the problem will exacerbate shortages.
Rick believes historic buying opportunities in the resource sector will be present this month (August is like a “time out” in Vancouver as many of the resource sector heavyweights are vacationing).

Rule is also very enthusiastic about alternative energies such as geothermal and small scale hydrothermal. He expects them to become a veritable “craze” in the coming years. These alternative energies will be politically correct as well.

Dan Denning, author of the book “The Bull Hunter”, also spoke. Dan presently resides in Australia and is more than familiar with the ongoing China phenomenon. He portrays China as just now entering the most metals-intensive phase of their industrial revolution. Chinese consumers are now stepping up to buy things.

The near unanimous consensus was that the resource bull still has strong legs.

Invest Resourcefully,

Rusty

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