I was up to my eyesballs in stocks. "If I'm wrong, we're done," I told my wife.
It was February 2009. As the markets were crashing in 2008, I had made an ALL-IN bet on the US stock market going up. Every dollar I had was in the market. And then, I borrowed money and bought even more stocks.
In hindsight, I bought too early. By February 2009, every single stock that I owned was down big. Another month or two, and I would have had to sell and take huge losses. And I'd be ruined.
However, as crazy as it sounds … I was not that worried. That's because I could tell that the tide was going to turn and soon.
I figured this out by watching the markets day and night. When you track things obsessively, like I was doing, you figure out the key things driving markets.
This market-driver is why I was not worried about being wiped out. It's what told me that my ALL-IN bet made during the worst financial crisis in modern history was going to start paying off soon.
What you should have been watching during the financial crisis was the value of the US dollar – the easiest way to do this to follow the US Dollar Index, which measures our currency against a basket of major currencies such as the euro, the yen and the Swiss franc.
The US dollar is the titanium of treaties worldwide. In a crisis, everyone buys dollars, because people worldwide are willing to accept it. In my travels, I've used dollars to buy a soda in a village in West Africa, buy souvenirs at the pyramids in Egypt, buy food in a small town in India and pay for a bunk at a mountain hut high in the Swiss Alps .
Dollar Falls, Stocks Rise
This wide acceptance of the US dollar was incredibly valuable during the 2008 financial crisis. Around the world, people were selling stocks in a panic and putting their money into US dollars. As a result, the dollar soared higher as stocks crashed.
And then in March 2009, the dollar peaked, allowing US stocks to put in a bottom before soaring once again.
This pattern, which I worked out during the 2008 financial crisis, has continued to work through the current bull market. Every time the US dollar has rallied, the stock market has crashed. And when the dollar crashes, the stock market soars.
This pattern has begun to play out once again. From its low point in May 2014 to its early high in March 2015, the US Dollar Index has jumped 25%. And through 2015 into February 2016, the index has soared even higher. And of course, just like the pattern predicted … stocks around the world plunged.
In other words, people who control the big money at banks, hedge funds, etc. are still programmed to do as they did during the financial crisis. So, the moment there is something to worry about – Greece, China, the oil price crash, rising US interest rates – people dump stocks and buy US dollars.
Bottom line: If you own stocks, you want a weak dollar. Why? Because the big-money investors are programmed to buy stocks when the dollar drops.
A New Fly in the Ointment
Will this system continue to work flawlessly?
Well, there's a new detail that's just becoming more important to investors. It's one that I believe could cause the value of the US dollar to crash.
The businessman, who is now set to be the Republican Party's nominee for US president, has promised to spend as much as $ 1 trillion to rebuild American infrastructure. Now, I do not know if Trump is going to be elected president. However, it's clear that if he gets elected, the US dollar is going to crash.
That's because his $ 1 trillion in spending is going to flood the market for US dollars as the government suddenly increases the supply of US dollars worldwide. And unless someone wants another $ 1 trillion in our currency, the US dollar is going to go down. That's just basic supply and demand. Supply is going to vastly outpace demand, pushing the value of the commodity down – in this case, it's the dollar.
And since people still have the same habit from the last financial crisis, we know what's going to happen when the dollar tumbles – stocks are going to go up.
The Trump Dollar Crash
Companies that directly benefit from Trump's $ 1 trillion infrastructure spending could also see their shares skyrocket. And so could stocks that directly benefit from a crashing US dollar.