Andrew Gordon

China hacked into the Pentagon’s computer system. That’s scary.

Venezuela deciding not to send us oil? Not so scary, even though they’re the sixth biggest crude exporter in the world. You see, an excess supply will form wherever they decide to send it. And that extra supply would eventually end up in the U.S.

But Jim Wooden asks something a little different in a recent email to me.

After reading the headline of your article, I speculated that you would be discussing the fact that the US is a huge net importer of energy and that most of the world's remaining known reserves of oil and natural gas are owned by National Oil Companies. It is not too far fetched to think that one or more of the top net exporters of oil might decide to reduce exports to help insure adequate domestic supplies in the future. Mexico with its rapidly declining production rates would be an example … the list of suspects is long enough to be of real concern.

Jim Wooden

Jim, the notion of free markets is a joke.

Trade is heavily manipulated by governments. From agricultural subsidies to export controls to trade tariffs, what we import and export is heavily influenced by the heavy hand of governments.

A good example comes from personal experience. And it kills me just to think of it.

The U.S. government told me (when I ran an international business) that I couldn’t sell police training/shooting simulation systems to the police force in Indonesia. Seems the laser guns were originally real pistols before being gutted and outfitted with laser technology.

You see, military equipment to Indonesia was prohibited at the time.

Countries use trade as a weapon all the time. And using oil as a weapon is nothing new.

But these countries don’t have to stop the oil from flowing into the U.S. to hurt us. If enough of them sell their crude for euros instead of U.S. dollars, that will do immeasurable harm to the U.S. dollar and thus to our economy.

I hate to say it, but some OPEC countries already have plans to do exactly this.

So this is what I predict. Those countries that have a grudge against us (and the list seems to be growing by the day) will hit us where we are most vulnerable. And there’s nothing more vulnerable now than the dollar.

If you’re interested, there’s an ETF, PowerShares DB US Dollar Index Bearish (UDN) that plays the dollar short.

For every ten cents the dollar loses in value against a basket of major currencies, you gain 10 cents. It’s a good way to protect yourself when you see the U.S. dollar under attack.

Good trading,

Andy

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