Without fail, the most common questions I get as I travel around the country are about the dollar:

How low will it go?

How can stocks rise with a sinking dollar?

What happens if the world stops investing in America?

Please—whatever you do—don’t let the ugly facts about the falling dollar keep you from making money in 2008! What the negative press isn’t telling you is how you can profit from the lowest dollar in 15 years. There’s a gold mine of opportunities waiting to be seized!

But before I get into the specifics, let me give you the rundown on how the falling dollar really works.

A weak dollar does two things:

1. It makes foreign imports more expensive;

2. It makes U.S. exports cheaper on the world market.

Because a cheaper dollar makes foreign products more expensive, Americans are more inclined to buy American goods. The greater the demand for American products, the greater the number of U.S. jobs needed to sustain a sufficient supply.

And the more Americans are working, the more consumers are spending and the more American companies are profiting.

On a broader scale, a falling dollar generates greater revenue for our companies.

How does this work?

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Overseas demand for our products grows because our products are less expensive, which in turn leads to an increase in our exports to foreign countries.

Three Ways to Profit From a Falling Dollar

1. Buy foreign assets that are priced in currencies rising against the dollar.

These include currencies, stocks from countries with rising currencies and stocks from U.S. companies where half of their generated revenues are denominated in foreign currencies.

2. Buy commodities or companies that produce commodity infrastructure.

These companies include businesses that manufacture products such as farming equipment and drills. Potash of Saskatchewan (POT) and Agrium (AGU), for example, are fertilizer companies that are profiting enormously from worldwide demand for food and the weak dollar. Anyone who’s turned on the news has surely heard about the global food shortage. Corn is in short supply everywhere and in order for farmers to meet the demand, they need tons of fertilizer – specifically, nitrogen fertilizer (see, “Grow Enormous Profits This Earnings Season“). Given the weak dollar, it’s much cheaper for farmers to buy the required fertilizer from U.S.-operated companies.

3. Buy Multinational Corporations.

Companies like Colgate-Palmolive (CL) and McDonald’s (MCD) earn lots of profits overseas and constantly convert those profits to dollars and earn more. Coca-Cola (KO) and Hewlett-Packard (HP the more I look at it, the worse it appears.

As always, I depend on some help from independent employment analyst Philippa Dunne for interpretation of the numbers.

• June’s loss of 62,000 jobs was boosted by a rather surprising jump in government employment, which was up by 29,000. Private sector employment was off by 91,000. Goods manufacturing was the worst with construction down 43,000 and manufacturing off 33,000. Temp employment, which provides a guide to the future, was off 30,000 jobs and is now off 7% year over year. Dunne calls that “an unambiguously recessionary number.”
• Up were healthcare, by 15,000 jobs, and bars and restaurants, by 16,000 jobs.
• Revisions to the two prior months totaled -52,000. Dunne notes we’ve now had an unusual five consecutive months of downward revisions to the first print, a streak usually found only in recessions or their jobless aftermath.
• Average hourly earnings were up 0.3%. The yearly gain is now 3.4%, down 0.3 points from the beginning of the year and well below inflation. That’s not good news for retail spending, especially since the other source of funds in the mid-1990s—home refinancing—has dried up. Without the tax rebates, Dunne observes correctly that retail would be very weak indeed.

These are not the kinds of numbers you’d see in a classic recession of the past when it was not uncommon to see the loss of 300,000 jobs in a single month.

But we’ve now had…

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…six consecutive months of job losses—something that’s never happened outside a recession, says Dunne.

Whatever inflationary pressures there are, they’re not coming from the job market.

And with more Americans out of work, Europe slowing and Asia taking its own set of hits—with the Indian and Chinese stock markets cut in half this year—you just have to imagine commodity prices will begin to suffer as demand sinks and marginal new sources of supply emerge.

What Else Do We Know?

So what else do we know about the economy besides the softness in jobs?

Here are a few items gleaned from government and private industry data in the past week:

• Domestic vehicle sales in June were the weakest since at least 1991. General Motors (GM) shares fell to their lowest level since the mid-1950s.
• Thomson Financial reports that estimated growth rate for Q2 2008 stands at -12.4%. On January 1^st, the estimated growth rate for Q2 2008 was 4.7%. On April 1^st, the estimated growth rate for Q2 2008 was -2.0%. If the final growth rate for Q2 2008 is -12.4%, it will mark the first time the S&P 500 has recorded four consecutive quarters of negative growth since Q2 2001 to Q1 2002. The stock market went on to be crushed from that point in 2002.
• The growth rate for the Financials sector dropped to -66% from -59% during the past week, while the growth rate for the Energy sector increased to 28% from 23% during the past week, Thomson says
• Energy (28%) and Technology (17%) sectors are expecting the highest earnings growth in Q2 2008, says Thomson. The Financials (-66%) and Consumer Discretionary (-18%) sectors are expecting the weakest earnings growth.
• If Energy’s growth rate finish at 28%, it will mark the third consecutive quarter of at least 20% growth for the sector.
• Over the previous four quarters, Technology has recorded an average growth rate of 16%. Systems Software, Computer Hardware and Semiconductors industries are the top contributors to earnings growth, accounting for about 71% of the growth in the sector.

Key Findings

These data are important because…

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…stock performance correlates, at the end of the day, to corporate profit growth.

We need to determine whether they are likely to peak, bottom or continue their current path.

My key findings, based on the latest info:

• Although financial companies’ earnings are extremely weak, they show no signs of bottoming. The process of deleveraging—or shedding debt and losses—is taking a big toll. They can’t take full advantage of the “carry trade” (in which they borrow cheap from the Fed and lend rich to companies) because their savaged balance sheets require them to retain more capital than usual and the creditworthiness of big borrowers is under assault.
• Technology companies’ earnings are probably peaking amid a decline in buying power among consumers and enterprises.
• Basic materials companies’ earnings are probably close to peaking. Although they look fantastic now, we need to be extra cautious about fertilizer makers, chemical producers, steelmakers and the like. They have been leaders of the past few years, but we need to see whether constrained supplies will maintain the upper hand against slipping demand.
• Energy companies’ earnings are still extremely strong. Higher crude oil and natural gas prices are a windfall that directly fatten the bottom line. However, we need to be aware that many energy companies have sold their production forward as a hedge and will not take full advantage of the higher prices. The current quarter’s earnings are going to be off the charts, making most of the stocks cheap. But we need to look ahead six months to a time when commodity prices may be flattening out, if they’re not actually lower. Energy producers will still be very cheap if crude oil futures fall by $40 a barrel and natural gas falls by $3, but they’ll probably get pummeled anyway as shareholders fear that these historically cyclical stocks are headed for a big down stroke.

Bottom Line

Basic materials and commodity companies have been market leaders for five years.

If their earnings are peaking amid the advent of a global recession, their shares will suffer and the market will lose key leadership.

So stay vigilant. Don’t assume that trends now in place will remain so forever.

To be sure, demographic trends worldwide are likely to keep the commodity rally going for several more years, if not another decade. But there will be hiccups along the way, and the next few months could possibly bring one of them.

Jon Markman is editor of Trader’s Advantage and regular contributor to Investors Insights. To get this type of actionable insight from Jon and other InvestorPlace Media experts go to www.InvestorPlace.com today!