You can’t fight City Hall. While our dollar indicator had weakened a touch in the past few days, it remained in positive territory, and I fully expected a win from the trade. But yesterday’s comments by Treasury Secretary Mnuchin promoting a weaker dollar cut us off at the knees.

Historically periods of profound and protracted dollar weakness, such as the period leading up to the 1987 crash and the one prior to the 2008 crash, have led to bubble-type behavior and sharply rising commodity prices. And at least in the two cases cited, the upshot was a disastrous market downturn as higher commodity prices combined with a rise in overall inflation.

It’s noteworthy that before Mnuchin spoke yesterday, the dollar already had declined about 10% from its 2016 high. We understand the thinking that a much lower dollar will make exports cheaper and add further impetus to the economy. But also true is that because the U.S. is so heavily dependent on the outside world, a lower dollar and higher commodity prices have the potential to raise inflation and lower standards of living.

Dependent on Others

Over the past 20 years or so, the U.S. has become ever more dependent on other countries for basic commodities. Oil goes against the trend, thanks to fracking, but even with oil we’re not self-sufficient. Moreover, a sharply lower dollar will raise the cost of the oil services and other products needed to produce oil here.

We hope a lower dollar proves less debilitating this time around. And we are not implying any sort of immediate debacle, as the buck could continue to decline over a protracted period of time. What does seem clear, though, is that we’ve entered a period of much greater volatility. One effect is that we should be offering many more trades, which should redound to your benefit. Even with today’s loss, we still have more than a nine-fold gain over the past two years.

We certainly will not rest on our laurels and will keep striving to continually improve our record. Among other goals, we plan to have many more trades in both Pot 1 and Pot 2, such as our happier trade on Cypress Semiconductor (NASDAQ: CY), which we closed out this week for a decent quick profit.

Note that Cypress was traded on margin, which amplified the return.

The message now is to stay tuned and pay close attention so that you’re prepared to move nimbly as the ride becomes both more turbulent, more exciting, and, we hope, increasingly rewarding.