The Dollar Could Easily Get Stronger

Ever since the start of 2017, the dollar has been in an almost constant decline.

In fact, the PowerShares DB U.S. Dollar Bullish ETF (NYSE: UUP) has dropped over 12% from its 2017 highs, despite a 2% gain.

UUP is an exchange-traded fund that measures the dollar against six other currencies. When the dollar strengthens relative to the others, the price of UUP goes up.

Generally, the dollar is seen as a safe haven, somewhere for investors to put their money in times of market uncertainty. And since we have seen a market that went straight up over a 15-month period, there was less demand for safety assets like the dollar.

But that can only last so long. Right now, there is a fear of inflation in the markets due to higher employment and wages.

When the economy is strong, inflation usually follows. That’s because when people make more money, they spend more. And when more money is spent, there’s more in circulation, and the excess supply makes each dollar less valuable.

However, inflation fears are likely overblown due to the fact that we haven’t seen an economy this strong since before the financial crash.

When inflation gets too high, it sends production costs up and business slows. But right now, inflation remains steady around 2%.

That may seem high, as it was around 0% for all of 2015 and some of 2016, but in the big picture, it’s normal. In fact, it’s seen as healthy.

As a reference, inflation had gotten over 4% in 2005 and 2006, right as the economy showed signs of slowing.

Many are wondering how to profit from this analysis.

Demand for the Dollar

The dollar could easily get stronger from here as well.

Right now, a huge part of the world’s economy has extremely low interest rates. Much of Europe, for example, is under 1%, and they aren’t planning on raising rates aggressively anytime soon.

The United States, however, has a rate of 1.5%. This isn’t high, but we could easily see that go over 2% this year if the economy stays healthy.

That would also increase the rate of government bonds, which is 2.86% right now. As the rate get higher, international investors will begin to buy more U.S. bonds, which increases demand for the dollar and sends its value up.

How to Profit

Even though the only way to directly invest in the strength of the dollar is through UUP, there are other ways with higher return potential.

One is buying call options on the UUP fund, but that’s much riskier, as you could lose your whole investment.

Another way would be buying a leveraged ETF against a different currency.

For example, the VelocityShares Daily 4X Long USD vs. EUR ETF (NYSE: DEUR)returns four times the percentage that the dollar appreciates against the euro.

There are also similar funds that produce the return of the dollar against other currencies, like the pound (NYSE: DGBP), the yen (NYSE: DJPY) and the Australian dollar (NYSE: DAUD).

The Significance of Thematic Investing

Index Services are dominating the investment markets from quite a long time by now. People who have the preference for diversity when it comes to investment are venturing towards the Thematic Investing. Here is the highlight on the significance of thematic investing.

It is an intuitive investing

This implies that instead of venturing into something unknown you can invest your hard earned money into the ideas as well as the trends that you are fully familiar with and the ones that you find exciting. Having a good knowledge about the same can provide you the capability of making the smart investment choice. As you go in for researching on your own this further makes your position comparatively strong. It further enhances your ability so as to customize your portfolio. You can invest in areas that interest you such as real estate, travel and healthcare.

You can align your values

Here you get the opportunity to be able to align the values that you think are important for you when it comes to your investment. You can simply invest in areas for which you hold the passion or the ones that are primarily focused on the social responsibility. You can simply make the world a better place to live with the help of your investment.

You have a vast choice

There are companies that give you the portfolio well prepared in advance if you so desire. On the contrary, you have the option to create a portfolio for yourself. There is a plethora of option of mutual funds that are available to you as an investor.

Helps to generate alpha

Thematic investing is the best way to get the opportunity for to generate alpha. By imply focusing you’re your investments in the hot spots where you can distribute the sizeable amount of your capital, you can easily generate the alpha. By simply analysing the other portfolios you can come at a decision for yourself.

Gives you flexibility and transparency

By simply creating your own portfolios you open up the gateways to great opportunities. Being able to customize your portfolio is a great advantage in itself. All that you need is to have a great visibility as well as control in addition to the transparency with no hidden cost. You get the clarity of your fractional share as well as the penny.

It is easy to access

Gone are the days when only a limited number of people had an access to the thematic investing due to the fact that the portfolio structures were not only expensive but at the same time restrictive as well as complex that consumed a lot of time for their maintenance. Most of these were available to high net worth investors. Today such is not the case as it has gained popularity, and become accessible for investors f all the brackets.

Bitcoin Thrives Against All Odds

Since it’s currently en vogue right now, I’d like to announce that I’m launching my own cryptocurrency next week.

Let’s call it “kingcoin.”

Nah, that’s too self-serving.

How about “muttcoin”? I’ve always had a soft spot for mixed breeds.

Yeah, that’s perfect – everybody loves dogs.

This is going to be the biggest thing since fidget spinners.

Congrats! Everyone reading this is going to receive one muttcoin when my new coin launches next week.

I’m going to evenly distribute 1 million muttcoins. Feel free to spend them wherever you like (or wherever anyone will accept them!).

What’s that? The cashier at Target said they wouldn’t accept our muttcoin?

Tell those doubters that muttcoin has scarcity value – there will only ever be 1 million muttcoins in existence. On top of that, it’s backed by the full faith and credit of my desktop computer’s 8 GB of RAM.

Also, remind them that a decade ago, a bitcoin couldn’t even buy you a pack of chewing gum. Now one bitcoin can buy a lifetime supply.

And, like bitcoin, you can store muttcoin safely offline away from hackers and thieves.

It’s basically an exact replica of bitcoin’s properties. Muttcoin has a decentralized ledger with impossible-to-crack cryptography, and all transactions are immutable.

Still not convinced our muttcoins will be worth billions in the future?

Well, it’s understandable. The fact is, launching a new cryptocurrency is much harder than it appears, if not downright impossible.

That’s why I believe bitcoin has reached these heights against all odds. And because of its unique user network, it will continue to do so.

Sure, there have been setbacks. But each of these setbacks has eventually resulted in higher prices. The recent 60% plunge will be no different.

The Miracle of Bitcoin

Bitcoin’s success rests in its ability to create a global network of users who are either willing to transact with it now or store it for later. Future prices will be determined by the pace that the network grows.

Even in the face of wild price swings, bitcoin adoption continues to grow at an exponential rate. There are now 23 million wallets open globally, chasing 21 million bitcoins. In a few years, the number of wallets can rise to include the 5 billion people on the planet connected to the internet.

Sometimes the new crypto converts’ motivation was speculative; other times they were seeking a store of value away from their own domestic currency. In the last year, new applications such as Coinbase have made it even easier to onboard new users.

If you haven’t noticed, when people buy bitcoin, they talk about it. We all have that friend who bought bitcoin and then wouldn’t shut up about it. Yes, I’m guilty of this – and I’m sure quite a few readers are too.

Perhaps subconsciously, holders become crypto-evangelists since convincing others to buy serves their own self-interest of increasing the value of their holdings.

Bitcoin evangelizing – spreading the good word – is what miraculously led to a price ascent from $0.001 to a recent price of $10,000.

Who could have imagined that its pseudonymous creator, fed up with the global banking oligopoly, launched an intangible digital resource that rivaled the value of the world’s largest currencies in less than a decade?

No religion, political movement or technology has ever witnessed these growth rates. Then again, humanity has never been as connected.

The Idea of Money

Bitcoin started as an idea. To be clear, all money – whether it’s shell money used by primitive islanders, a bar of gold or a U.S. dollar – started as an idea. It’s the idea that a network of users value it equally and would be willing to part with something of equal value for your form of money.

Money has no intrinsic value; its value is purely extrinsic – only what others think it’s worth.

Take a look at the dollar in your pocket – it’s just a fancy piece of paper with a one-eyed pyramid, a stipple portrait and signatures of important people.

In order to be useful, society must view it as a unit of account, and merchants must be willing to accept it as payment for goods and services.

Bitcoin has demonstrated an uncanny ability to reach and connect a network of millions of users.

One bitcoin is only worth what the next person is willing pay for it. But if the network continues to expand at an exponential rate, the limited supply argues that prices can only move in one direction… higher.

The Bottom Line

Bitcoin’s nine-year ascent has been marked with enormous bouts of volatility. Therewas an 85% correction in January 2015, and a few others over 60%, including a colossal 93% drawdown in 2011.

Through each of these corrections, however, the network (as measured by number of wallets) continued to expand at a rapid pace. As some speculators saw their value decimated, new investors on the margin saw value and became buyers.

The abnormal levels of volatility are actually what helped the bitcoin network grow to 23 million users.