There's a rule of thumb in markets, an inverse relationship between the dollar and common stocks that has been especially prevalent the past several trading sessions. When stocks rise, the dollar weakens. When stocks go down, you're likely to see the currency strengthen.  So it has been with the dollar and the S&P 500.  "People sell dollars and buy assets priced in dollars," explains Keith R. McCullough of Research Edge LLC, a New Haven, Conn., market service, referring to assets like foreign currencies or securities denominated in foreign currencies, gold, oil or even real estate or whole companies. This trade has worked out splendidly this year as the dollar has dropped 16%, but common stocks are up 50%-60%, or more than three times the decline in the dollar's value.  It's brilliant. You make huge profits by turning dollars, 63% of the world's foreign exchange reserves, into assets that protect against the dollar's decline--and then some! Oil has doubled, and so has copper. Gold is up a surprising 25% this year, and energy and commodity prices are also higher in a weak dollar environment.  There are plenty of reasons why stocks should go up when the dollar drops. Since 40% of the S&P 500 earnings come from multinational operations abroad, a lower dollar means revenues from foreign currencies translate into higher earnings for U.S. companies, and higher earnings translate into higher stock prices. Just review the recent performance in Caterpillar ( CAT - news - people ) (61% sales outside U.S.), paint maker PPG (55% revenues outside U.S.) and McDonald's ( MCD - news - people ) (67% foreign revenues).  Also, as the dollar falls, foreign investors especially see their buying power in the U.S. rise, making them more willing to bid for stocks and bonds.  Then, there's the so-called carry trade, which has been stimulated by the zero cost of borrowing dollars to invest in other assets.  "Since interest rates are zero, you can borrow dollars at no cost at all and use them around the globe," says Jeffrey Kleintop, chief market strategist of LPL Financial, a privately held brokerage firm based in Boston. "For example," explains Kleintop, you can borrow dollars at zero, and invest in Brazilian bonds yielding 5.2%. As the real (Brazil's currency) has risen 26% against the dollar so far in 2009, such a carry trade would have earned 31%, or double the loss of value in the dollar.  Gold and oil, especially, have an inverse relationship to the dollar, underscores Frank Holmes, CEO and chief investment officer of U.S. Global Investors ( GROW - news - people ), a mutual fund empire headquartered in San Antonio, Texas, that focuses on hard assets. "When gold is up, the dollar tends to be down, and vice versa," says Holmes. "Looking at weekly data going back 20 years, this relationship occurs nearly 70% of the time."  Holmes, manager of the U.S. Global Investors Gold and Precious Metals (USERX) fund, believes gold mining stocks are cheaper than bullion. "If the price of bullion goes up 10%, gold mining shares like Freeport McMoran, Anglo Gold and Newmont Mining ( NEM - news - people ) should rise by 20%."  For gold to rise to its former peak price of $850 in 1980, adjusted for inflation, it would have to double again to $2,300 an ounce, Holmes says. Holmes advises investors who want diversification among all commodities and foreign currencies to invest in Global Resources (PSPFX), a mutual fund his enterprise manages.  McCullough, of ResearchEdge, suggests buying iShares Brazil ( EWZ - news - people ), for the play on Brazilian commodities and iShares Taiwan ( EWT - news - people ), as a play on closer ties to mainland China. To play the dollar's slide, you could short the PowerShares DB U.S. Dollar Index Bullish ( UUP - news - people ), or buy puts on the exchange-traded fund.
Brazil, gold and oil are just a few of the beneficiaries of a weaker dollar, not to mention U.S. stocks.