Tags: Hyman | commodities | dollar | stimulus

ECB and Chinese Stimulus Will Boost Commodities and Bring Down the Dollar

By    |   Monday, 10 Sep 2012 09:01 AM

This is a commodity trader’s dream … to have central banks stimulating their economies. And that’s exactly what they’re getting!

On Thursday, the European Central Bank (ECB) decided to be willing to do “unlimited” bond buying. Obviously, “unlimited” was the key word in ECB President Mario Draghi’s speech that day.

That started it all.

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China followed suit the very next day, as the country decided to do a $100 billion infrastructure program.

It wouldn’t surprise me if the Federal Open Market Committee, which meets on Sept. 12 and 13, decides to do some form of stimulus as well. If so, we’d have a triple whammy from the three largest economies in the world.

With a presidential election just ahead and a looming “fiscal cliff,” these central bankers might decide to lay the hammer down and really try to juice up these economies in the medium term, which would buy their governments a bit more time to get their fiscal act together, not to mention to get past the election.

All of this equates to good times for the commodity trader/investor. Why? As these central banks support their economies, there’s no need for investors to hide out in the greenback as a defense.

They can come out of their caves and invest in risk-on assets like commodities once again.

In fact, money is already pouring out of the buck. This was proved on Friday when the dollar broke its year-and-a-half long uptrend line. The dollar’s trend is now downward, which will push asset prices higher (particularly inflationary assets like commodities).

Not only is the downfall of the dollar jacking up commodities once again, but China’s new program is also because of the area where it is spending money … on infrastructure.

That will run up things like copper, steel, etc. So copper and steel exchange-traded funds (ETFs) are getting a boost, as are copper and steel stocks.

In fact, while steel and iron ore prices have been diving, our steel and iron ore stock in the Ultimate Wealth Report has been holding up. It’s held up so good that it’s up 11 percent in the couple of months that we’ve held it. We’ll see it break out higher within the next month or two and I expect it to be up 20 percent then.

China’s stimulus will only aid our positions like this in taking them much, much higher. Also, with the ECB essentially showing that they will save the euro, it allows money to flow away from the buck and back into the euro.

Editor's Note: Join the 3.5% of Americans who are truly wealthy and financially secure.

I’ve been writing to my subscribers that this would happen. In fact, we took a position in a European country ETF a couple of months ago when no one wanted to invest in Europe. As of Friday, that position is up 36 percent in the Ultimate Wealth Report portfolio.

So, these are good times for the commodity investor and foreign currency investor. But it’s bad news for those who just hold dollars and consume with those dollars, which have eroding purchasing power.

Make sure you’re on the right side of the “central bank game.” If you’re on the wrong side, you’ll find yourself growing poorer, as food and energy costs soar and your dollar continues to be diluted.

But if you’re holding “real wealth” assets like we have in the Ultimate Wealth Report, then you’re going to find that you’re well ahead of the “inflation game.”

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Ultimate Wealth Report. Discover more by Clicking Here Now.

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2012-01-10
Monday, 10 Sep 2012 09:01 AM
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