Here is Your Trade

As we all know, the federal government and governments around the world are flooding the market with excess liquidity. The US government has put trillions with a "t" dollars into the system with the TARP, funding ailing banks, the commercial paper market, etc. All that is actually a good thing in response to a complete lack of liquidity and confidence in the market. The side effect of this massive liquidity injection is rapid inflation when the economy recovers. The other side effect is the massive devaluation of the US Dollar.

How to play it? Very simple. You can buy calls on the (UDN). This is a short-dollar ETF. You buy calls in the same way you buy the (GLD) calls that have already made you a ton of money. Buy the $30 strike with JUN 09 expiration. You can currently buy them for about $.90 per contract. This gives you a long time until they expire. It also gives you a long time for them to be in the money. The same rule applies. When they double, take half off and keep your original investment safe. There is no reason to get cute with this market.

There is very little that we can predict with the way this economy is going. One thing we know for sure is that the government is running the printing presses. We also know that when the government produces any stimulus, nevermind the massive stimulus we have seen, the inflation and currency picture gets ugly down. You know this is going to happen. You may as well make the easy money with it. Until nex time, stay low risk.