This morning, the Japanese government intervened in the currency market for the first time since 2004, selling yen in an effort to stem the yen's 15-year high against the U.S. dollar.

Governments like Japan can intervene in the currency markets all they want. But the natural forces of a bear market will not be swayed long-term by forced government manipulation. The bear market in the U.S. dollar has been alive and well for eight years now.

Since 2002, the U.S. dollar measured against a basic of the world's other most popular currencies has fallen 32% in value. Since May 2010 alone, the U.S. dollar has fallen 8.7%. The bear market in the U.S. dollar is a reverse mirror of the bull market in gold bullion prices.

In spite of what you have read in the media about Wall Street since the recession hit, traders have been making large profits over the past eight years on two "sure thing" bets: the U.S. dollar's demise; and the return to gold bullion as the world's only real currency. In my opinion, the trends have a long way to go until they have completed their cycle and are exhausted.

Ironically, it has been the American government that started both the bear market in the greenback and the bull market in gold. The more debt America piles on, the weaker our currency gets, and the more gold rises in price. The White House forecast of a $20.0-trillion national debt by 2020 is giving more fuel to the American dollar's demise.

A lower priced currency is good for this country. It makes our exports more affordable to foreigners. A weak greenback means that large foreign corporations convert overseas profits to more dollars.

And, of course, a falling U.S. dollar means that all the debt the U.S. has piled on will be cheaper to pay back years down the road. The more greenbacks in the system, the bigger the offset to deflation.

I wrote years ago that the decline in the U.S. dollar, to benefit America, needs to be a steady decline, not a collapse in the currency's value. And that is what has been happening since 2002.

On the other hand, if I were a betting man, I would wager that the government is not too happy to see the rise in gold prices. Once euphoria sets in about the bull market in gold, which will eventually happen, consumers and investors will flock to gold under the herd mentality theory.

This will result in a rapid debasing of the U.S. dollar, forcing interest rates up sharply to defend the greenback. All of a sudden, the gradual decline in the value of the U.S. dollar that we want as a country could result in a mass exodus out of the currency.

Michael's Personal Notes:

With gold up about $24.00 U.S. an ounce yesterday to a new, fresh record high of $1,271, I was curious to see if any of the major media had picked up the news. My belief continues that most investors are still not aware of, and have missed, the 10-year bull market in gold bullion prices.

The only popular mainstream site I could find that covered gold's big move yesterday was aol.com. "Gold hits new record high amid economic worries," was one of the lead stories on the aol.com home page last night and this morning. Of course, as usual, the popular media gets it wrong. Gold didn't rise yesterday because of concern over the economy; it rose because the U.S. dollar got hammered Wednesday against other world currencies.

Other popular sites like yahoo.com and msn.com did not have stories on gold.  The New York Times and USA Today did not carry front-page articles on gold bullion's price advance.

Why is this important? There are usually three phases to any bull market. The first phase is when the bull market develops and few know it is happening. The second phase is when the smart money gets in (that is where we are today), and the third phase is when the popular media picks up the bull market, the investing public starts buying and speculation sets in. With none of the popular media covering the advance in gold prices, the second phase of the bull market remains safe and well.

Where the Market Stands:

The Dow Jones Industrial Average opens this morning up about one percent for 2010. With the weakening U.S. dollar, with no interest rates in site, with the Fed ready to jump in to help the ailing economy again, with the herd in the U.S. Treasury market getting nervous, and with the amount of negativity out there, we have the perfect environment for stocks to move higher.

October is usually the worst month of the year for the stock market. I don't see that this year. I'm cautiously looking for higher stock prices and I see the bear market rally in stocks that started in March 2009 as still intact.

What He Said:

"Investors have been put into an unfair corner. Those that invested in stocks because they got caught in the tech boom (1999) have seen their investments gone. Now, those that have leveraged heavily to play the real estate game, because it is the place to be (2005), could see the same fate as the stock market investors. Thanks again, Mr. Greenspan." Michael Lombardi in PROFIT CONFIDENTIAL, May 27, 2005. Michael started warning about the crisis coming in the U.S. real estate market right at the peak of the boom, now widely believed to be 2005.