Mining for Money: The Dollar’s Wile E. Coyote Moment

Are you old enough to remember Warner Bros. cartoons? Man, I used to love those on Saturday mornings. And what’s happening to the U.S. dollar now reminds me a lot of the old "Road Runner" cartoons. I think King Dollar is having a "Wile E. Coyote" moment.

Now, if you DIDN’T watch the cartoons, I’ll explain. Wile E. Coyote was always trying to catch a saucy, nimble, infuriating critter called The Road Runner. The coyote would construct elaborate traps, often furnished by the ACME Corp. But always, ALWAYS, the coyote’s grand schemes would go wrong.

Psychologists would probably have a field day with the fact that I did not identify with the Road Runner. I felt bad for the coyote. Just once, I wanted him to catch that danged bird and wipe the smirk off his face.

But it was not to be. So, poor ol’ Wile E. would get run over, flattened by anvils, roasted, catapulted and more.

And more often than not, in every show, he would end up running off a cliff. Then he would hang suspended for a bit. Then gravity would kick in, and Wile E. Coyote would fall a long, long way. A puff of smoke would mark his painful conclusion.

And that’s why I say that the U.S. dollar, the mightiest of currencies, is having a Wile E. Coyote moment. It just ran off a cliff. Look at this chart.

You can see that the U.S. dollar has been under pressure for all of 2017. However, it has been able to hold support. Though it did test that support in March. Now, we’ve finally seen a clean break to the downside.

The greenback is hanging there, like Wile E. Coyote. He always used to run in mid-air and try to grab and scramble his way back onto the cliff. That’s what the dollar seems to be doing with its little rally today.

But the easiest path for the dollar — just like for the coyote — is to yield to gravity. To go lower.

Now, here’s something interesting. The dollar isn’t the only thing going down. Gold is, too. For now. But that’s unusual. Gold is priced in dollars. So the two usually sit on opposite ends of the "see-saw of pain."

I recently told you where I expect gold’s current pullback to bottom. That could be a great springboard for a rally higher. And one thing that could give that rally a rocket assist is a weakening greenback.

After all, if President Trump is going to print from here to infinity to pay for his tax cuts, why would big international investors want to hold dollars?

Now, this isn’t written in stone. Both the dollar and gold may have more zig-zagging to do before the final act of this Warner Bros. cartoon.

But I’ll tell you, it’s not wise to bet on Wile E. Coyote. The Road Runner always wins.

Just like hard money always wins over paper money.

All the best,
Sean

Sean travels far and wide to seek out small-cap values in the natural resource sector. His journey started in New England. As a youth he worked on Mt. Washington, on the cog railroad that runs to the summit. Working on…