Much to the dismay of the talking heads, tomorrows FED meeting will be a non-event.

The media has been hinting that the FED will raise rates tomorrow because there are “signs” of recovery. Of course these are the same people who ran an article a few days ago titled “Retail Stocks Are Rebounding —Even Without the Consumer” (sadly, that isn’t a joke). The FED has been saying one thing and doing another for over a year now and I expect that to continue.

In previous articles I pointed out that GDP numbers are a farce (“stimulus” was responsible for 3% of GDP growth) and that unemployment and inflation statistics are misleading on purpose. Having said that, the FED’s policies are based off the numbers it gives to the public. So, if FED inflation numbers are tame, unemployment is seen as decreasing and GDP growing, you would think tomorrow would see a rate hike.

The problem…

Chairman Ben Bernanke stated on national television that “He would not be responsible for the next great depression” and that IS exactly what will happen should he increase the rate tomorrow. When you couple the human desire for power and false statistics, you end up with the status quo, which is what will happen tomorrow – NOTHING.

Dollar

The more I read, the more I watch what’s going on, the more I realize our governments policy is to weaken the dollar…. Significantly.

The dollar has lost 98% of its value since the 1970’s, and we now have the most debt in the history of mankind, and the printing presses are only starting to heat up. The long term trend in the dollar is down, and it will stay that way.

Below is a chart from my TradeKing account which shows both the dollar (ETF – UUP) overlayed with the gold ETF GLD. Notice the red sloping line? That is the trend for the dollar. Nothing goes straight up or down, so this recent dollar bounce is nothing more than a short term move. You might want to note the correlation between the two as well.

Having said that, a weak dollar does many good things in the short run. It increases exports (it’s cheaper for other countries to buy our goods, mainly military equipment) it increases tourism to the USA (it becomes cheaper to travel here as other currencies strengthen against ours) and ironically the relaxed rates (which hurt the dollar) has inflated the equities market.

I want everyone to think about the above for a minute. Let’s assume you’re a bank and rates have been lowered to essentially zero, meaning you can get vast sums of money for free. What would you do with it? Are you shocked to see the market up so substantially on what I consider terrible economic news? No. Banks are buying the market instead of lending to small business. Ironically bankers during the Great Depression met behind closed door and attempted to inflate the markets. If you haven’t read the book “The Great Crash of 1929″, I highly suggest it, the parallels are quite shocking.

Gold

Gold has lost a bit of its luster the last few days, but I attribute that to the dollar bouncing off of its lows. It’s quite common in the equities market for shorts to cover and buyers to come into the market when an equity makes a new low. I will be fading this dollar rally and adding to my gold holdings.

In the 2nd quarter total inflows into Gold ETFs increased by 46 tons, which followed a 459 ton increase in the 1st quarter.

Below is a chart of the ETF GLD (gold) from my TradeKing account Notice the bullish wedge formation (2 red lines converging on the right side of the chart) and the 2 circles. I expect GLD to break to the top of the wedge formation (that’s when you buy). The 2 circles represent “wedging” in my opinion. Wedging occurs when a price movment happens (in this case down) but volume drops. That signals that there isn’t much conviction behind the move.

Buy anything pegged to the dollar. Don’t listen to main stream media about a strong greenback, it’s a flawed currency.

One thing I would like to add before I sign off. I believe I am correct regarding the dollar, mainly because nobody in the mainstream media is talking about it.

Great Investing To All!