The Tarnished Dollar: How to Profit
By Thomas G. Cloud - February 20, 2003

The primary focus of this article is to make our readers aware of what is going on with the dollar. Additionally, I will discuss the fall of the dollar and how it affects the price of gold. Over 30 years ago, Nixon unlinked the U.S. dollar and gold. From that point forward, the signals as to gold's performance have been quite clear.

Since 1971 (i.e., when Nixon unlinked the U.S. dollar and gold), the dollar has had several major declines and gold has increased as much as the dollar's decline or more in many markets. The first was from 1971 until March 1980 when the dollar declined 70% while gold rose from $70 to over $800 per ounce. Another example was in the mid '80s. During this period, the dollar declined 50% over a two-year period and gold made a 60% move that pushed it briefly above $500 per ounce. Certainly you recall the reverse we witnessed during the mid '90's when the dollar enjoyed a five-year rise while gold entered a five-year bear market. Once again, however, there has been a major reversal in this relationship. As you will see from the performance of the dollar as compared to several other currencies as well as gold and silver, we are well entrenched in a 1970's style fall of the dollar and rise in gold. The reverse relationship that has historically existed between gold and the dollar will only pick up as the supreme status of the dollar as the world's currency is and will continue to be challenged by the new Islamic gold dinar currency that will minimize the dependency on the U.S. dollar for the Muslim world.

2002 Exchange Rate Calculations

Source: Oanda.com Website: http://www.oanda.com/convert/fxhistory

What to expect?
The ideal of the Islamic gold dinar dates back to 1983. Widespread in Europe, news on the gold dinar was kept quiet in America. Professor Omar Fadillo founded the Morabeteen International Organization in order to establish an Islamic currency that would be backed by gold. His ultimate hope was that one day the Islamic countries would use it as opposed to the U.S. dollar. You can be almost certain that this is unfolding right before your eyes. Malaysia will begin using this new currency by the middle of 2003. If successful, the U.S. dollar will be minimized as an intermediary tool in commercial dealings around the world. The dollar, like the U.S. stock market, has been grossly overvalued and has only held its lofty position due to our own high perception of it. This has ended and things will become clearer as the year progresses. Remember there are 1.3 billion citizens in the Islamic world that are looking forward to this currency.

How to profit?
As was mentioned in our "asset allocation model" for the first half of 2003, it is possible to invest in an international bond fund which will likely result in double digit returns for the second year in a row. The international bond fund at American Century increased over 20% last year. American Century is a no load mutual fund. This fund might be a good addition to your portfolio. For further information, phone them directly at (800) 345-2021.

You can also profit by owning physical currency. It is no different than buying gold, silver or platinum. You are simply trading your U.S. dollars in for another currency that should be worth more when you convert back into U.S. dollars at some future point. We have sold foreign currency for the last several years. Please contact us to hear our views on what will be the bigger winners for 2003 and beyond. Some of these may surprise you! Who would have thought the Norwegian Kroner would increase 28.65% against the dollar during 2002? The main reason for this increase is that the Kroner is an oil-backed currency. This part of your portfolio should represent somewhere from 20% to 30% (in 2003 as it was for 2002).

FINAL THOUGHTS
I appreciate the many messages I have received regarding my call last January that the dollar would fall during 2002. While I don't expect to see the numbers to be quite as high during '03, the dollar is still in a bear market and will remain so for the foreseeable future. Investors should keep this in mind and should strive for a truly diversified portfolio.

I encourage you to share my newsletters and updates with your friends and relatives. Pass along our e-mail address of tgcloud@bellsouth.net. Ask them to contact me and I will be glad to add them to our list. Turamali, Inc. does not sell our client list to anyone for any reason. Our client list is maintained and used exclusively by us! Also keep in mind that in mid 2002, we relocated to 5805 State Bridge Road, Suite G-336, Duluth, Georgia, 30097. Our local phone number is (770) 441-1550 and our toll free number outside of Georgia remains (800) 247-2812.