A powerful trend emerged over the last few years -

• When the US Dollar Index goes up, the stock market goes down.

• When the US Dollar Index goes down, the stock market goes up.

What's Happening?

Stocks are an asset - like any form of property.

• When the value of the US Dollar goes down, it takes more dollars to buy the same asset - stock prices rise.

• When the value of the US Dollar goes up, it takes fewer dollars to buy the same asset - stock prices fall.

Other assets work the same way. Commodities also rise and fall in the opposite direction from the US Dollar. Even collectibles like art and antiques can work that way too.

This trend hasn't always been with us. What's new is the speed the US Dollar changes value now. The Dollar has been bouncing up and down very fast. Currency rates usually change slowly. When big currency changes happen fast - in weeks instead of months or years - stocks are revalued just as fast.

• US economic uncertainties drive fast changes in US Dollar value.

• European and Asian economic uncertainties also drive fast changes in the value of the US Dollar relative to European and Asian currencies.

US government policies are pushing the US Dollar down, despite short-term bumps -

• Near-zero Federal Funds Rate.

• "Quantitative easing."

• The Federal Reserve Bank buying US Treasury debt with printed money.

• Federal stimulus spending.

• Rising Federal deficits.

The long-term trend of the US Dollar will stay down while these policies are in force.

How to Keep Your Equity Trades Safe

The basic problem is the uncertain value of the US Dollar.

So the basic solution is to diversify away from the US Dollar.

The two chief ways to cut your US Dollar risk and make safe money are -

• Buy foreign assets.

• Buy physical assets.

Foreign Assets

An equity trade done in a stronger currency than the US Dollar will keep you safe. For example -

• The Australian Dollar rose about 25% against the US Dollar in the last six months of 2010.

• So if you owned a share of Australian stock during those six months, the price could have gone down 25% in Australian Dollars without costing you anything in US Dollars.

• Most big US brokers now do equity trades on foreign exchanges.

Many big US companies make a lot of their money overseas. That protects them - and their shareholders - against a weak US Dollar.

• The average S&P 500 company earns 44% of its revenue overseas.

• Some examples - Intel 79%, Exxon Mobil 69%, McDonald's 65.5%, Proctor & Gamble 57%.

You can also just buy foreign currencies to balance your equity trades. There are several ways to do it -

• Buy FDIC-insured foreign-currency CDs from some US banks. Everbank does this.

• Buy currency ETFs. There are ETFS for the Australian and Canadian Dollars, the Euro, the British Pound Sterling, the Swiss Franc, the Swedish Krona, the Japanese Yen, and the Mexican Peso.

• Buy options or futures contracts on any foreign currency.

• Buy actual foreign currency through a foreign exchange dealer.

Physical Assets

Physical assets - things you can touch and that people use - keep their value. If the US Dollar goes down, physical assets will be worth more dollars. You can use lower-risk physical assets such as commodities to balance your higher-risk equity trades. Commodities include -

• Metals - gold, silver, platinum.

• Energies - oil, gas, ethanol.

• Grains - wheat, corn, oats, soybeans.

• Meats - cattle, hogs, pork bellies.

• "Softs" - cotton, orange juice, lumber.

There are several ways to buy commodities -

• Buy commodity ETFs. There are many such ETFs.

• Buy stock in commodity producers like oil drillers or gold miners.

• Buy stock in companies selling goods and services used by commodity producers, such as -

• Equipment to operate mines and wells - drill rigs, tunneling equipment.

• Farm supplies - seed, fertilizer, insecticide.

• Commodity transport - tankers, pipelines, trains.

• Commodity storage - tanks, silos.

• Commodity trading services - commodity exchanges and information services.

The Big Question: What should you buy and when? How do you balance profit and safety to make safe money?