IVolatility’s March Trading Digest had an interesting commentary on the impact that the dying USD should have on commodities.

Go read this article. I will sum up, and not reiterate the world - essentially their point in the beginning of the article is that the falling dollar will most likely drive up the cost of commods that are priced in USD (duh) - inflation. From a trading perspective - this means get long commods. As I mentioned yesterday, generally being short the USD, given the US fiscal policy (to ’save us’ from the impending economic issues) seems wise as well.

So - we have inflation adjusted treasuries, short the dollar in (via whatever instruments you choose), long volatility via the VIX futures or options, long commodities however you choose. All of this seems sound at the core. It seems that the US stock market will likely go down, but the rest of these decisions seem significantly more likely to be the way that it will go.

The next question - given the above theoretical portfolio - how do we diversify and take on some soft of hedge-ish positions so that if we are wrong, we are not screwed… How do we do this in such a way that we do not set ourselves up to spend all our earnings paying out the hedges…

More food for thought;
Chris

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