The Best ‘Currency’ For A New America (FXF, SLV, GLD, UDN, UUP, USO)
Michael Sankowski: You don’t have to look far to find terrifying headlines:
- The U.S. government — the most powerful institution in world history — will default on its debt next week unless the debt ceiling is raised.
- The eurozone faces a string of potential defaults by its member nations.
- Gold prices hit another record high on Monday.
- Oil prices seem to have settled in around $95 a barrel.
Talk about currencies and commodities is everywhere you look.
Why are currencies and commodities dominating the news and our financial system? What’s the link between the currency markets and the commodity markets?
Governments are losing control of their money, so commodities like silver, gold and oil are becoming a new form of money. People are waking up to the fact that the commodities of today behave more like currencies than old-school commodities.
To be worth more than the paper it’s printed on, a currency needs to possess a unique quality. The holder needs to be able to do something with this currency that nothing else can do.
For traditional currencies, the ability is easy to uncover. They can pay taxes with that currency — and governments won’t accept anything else.
The U.S. government doesn’t accept gold, houses or boats to pay your taxes. You need U.S. dollars — that’s all the IRS accepts. The unique quality of a U.S. dollar is that you can pay U.S. taxes with it.
If you try to pay your taxes in gold, the U.S. government will sell the gold, and then credit your tax account with the amount of U.S. dollars it received for the gold.
But since governments are not responsible enough to care for their money, people are looking to other sources to become money. So commodities are becoming the currencies of the 21st century.
Commodities like gold and silver have long been considered money — and for good reason.
Gold’s a no-brainer — its scarcity and portability makes it valuable and unique.
But look at oil. We’ve built a huge society around using oil and gasoline. Our economy cannot run unless it has large amounts of oil and gasoline. There are no substitutes for oil and gasoline.
There is the similarity between currencies and commodities — they fill a highly specific demand that cannot be met by anything else.
Our country — and the world — needs massive amounts of gasoline, and nothing else can meet this need. U.S. dollars might be able to buy gasoline, but you cannot put U.S. dollars in your tank.
As the dollar falls out of favor, commodities are becoming the real currency… and nothing will stop this process.
The opportunity for us? Much of the world is fighting this change every step of the way. Most people just don’t want to accept this major change.
This does not mean the price of commodities will go straight up, or that the value of currencies will go straight down. Markets prices never move in straight lines.
This is directly related to the potential for a U.S. government default. Politicians are risking a double-dip recession to score political points over how to control the currency of the United States.
Currencies and Commodities Say: We’re Terrified of a U.S. Default
The U.S. debt ceiling crisis is causing serious problems. The value of the U.S. dollar is getting hammered because politicians threaten to default on the U.S. debt.
The currency and commodity markets are going nuts over the U.S. potential default. My favorite currency, the Swiss franc, is up over 4% in just a few days.
Fortunately, at Currency Profits Trader, we’re long the Swiss franc.
I’ve talked to my readers about the safe haven status of the Swiss franc since March. During bad times, the Swiss franc is the safest currency in the world. We’ve made money two times going long the Swiss franc.
We just got long the Swiss franc again this week. This crisis is pushing the smart money into the franc.
But is not just the traditional currencies — the new currencies of oil, gasoline and gold have all rallied higher against the U.S. dollar.
Gasoline prices are back to near $4 per gallon. That’s right; you’re paying more at the pump because they won’t hike the debt ceiling.
To be able to ride out the transition to the new currencies, you have to be aware it’s even happening. You’ll see the new currencies gaining ground on old-school money as governments lose control of their finances.
For now, stay long the Swiss franc. As other opportunities arise, I’ll let you know over at Currency Profits Trader.
RElated ETFs: CurrencyShares Swiss Franc Trust ETF (NYSE:FXF), iShares Silver ETF (NYSE:SLV), SPDR Gold ETF (NYSE:GLD), PowerShares DB US Dollar Index Bullish ETF (NYSE:UUP), PowerShares DB US Dollar Index Bearish ETF (NYSE:UDN), United States Oil ETF (NYSE:USO).
Michael Sankowski is the Editor of Taipan Publishing Group’s Currency Profits Trader. He has worked as a financial trader and analyst for the past 13 years in over 60 financial markets, beginning as runner on the floor of the Chicago Board of Trade in 1994 and working his way up to become a trader. Michael has traded for a $250 million hedge fund, which required him to trade all over the world, including the United States, Europe and Asia. He has also worked as a product designer for U.S. Futures Exchange, where he focused on trading in Forex, futures, options and fixed-income cash markets.
Michael holds the prestigious CFA Charterholder and Chartered Alternative Investment Analyst (CAIA) designations. The CFA charter is a certification for finance and investment professionals, particularly in the fields of investment management and financial analysis of stocks. The CAIA designation establishes a standard for those who specialize in the area of alternative investments, such as hedge funds, venture capital, private equity and real estate investment. Michael’s solid background and certifications in financial trading make him the best man to share his expertise and Forex recommendations with the readers of Taipan Publishing Group’s Currency Profits Trader.