Seattle Bubble

So I'm usually pretty good about knowing in general what I should be doing with my money, but horrible on acting on that knowledge. Given current economic uncertainty, this is one time I know I need to get moving. I'm looking for others to share their thoughts on investment alternatives outside the $. What have you done?

Here's what I think my strategy will be:
- Already sold most of my US equity positions. I'll probably keep no more than 25% of my portfolio in this - which isn't really all US, since it's mostly large caps which are by their nature global. Am sitting on a big pile of cash right now
- Plan to invest the cash in a mix of Euro and Yen denominated assets
- Thinking 60/40 between Euro and Yen
- Probably 80/20 Equities vs. bonds
- Looking primarily at mutual funds, mostly because I am too lazy and/or disinterested to pick individual stocks
- Staying away from straight currency plays (see lazy/disinterested comment above)
- I'm not a gold/metals bug. If the global financial system melts down, I just figure I'll go with it.

So, some questions
1) if I buy a mutual fund that has a EU or Asian focus through Fidelity, am I getting a currency hedge as well as market hedge? In other words, are these funds going to go up as the Euro goes up against the $ - or am I really just buying a $ denominated fund that will continue to see erosion in purchasing power?
2) Any recommendations on particular funds?
3) comments on general approach? Suggestions?

Do not overlook our neighbor to the north. Canada is a wonderful play right now. A large amount of their economy is based on mining exports. If there is no global recession, demand will far exceed supply. If their is a recession, supply might be more able to keep up with demand, but this is still a pretty safe bet. Additionally, your money is going to a safe place.

Another play I'm looking into right now is money markets in foreign currencies. I think you can get a 6% MMA in Great Brittan. This is a good enough return that you aren't betting on either currency, but rather just looking for a decent return and hoping nothing extreme happens to clobber the pounds value against the dollar.

Finally, I'm not totally sold on Japan. I think their economy might be the second sickest next to our own. I don't have any proof on hand, just a general impression I've been getting lately.

Nice posts!

Very informative post. Thanks Siddha

Some ideas for those who are not so optimistic:

BEGBX: primarily european bond fund
BEARX: short the US markets and long gold fund
CEF: central fund of canada - gold + silver
GLD: gold ETF
RRPIX: short treasuries (makes money when interest rates rise)

Keep in mind that markets don't move in a consistent direction and just looking at the headlines this week so far, the stock markets and the dollar appear to be rallying back. The dollar has been so pummelled over the past 2 years (and horribly bad over the past 3 months) that it could be due for a more significant rally...

Personally, i had thought that the US fed would show more inflation-fighting teeth and would sacrifice the stock market to save the dollar, but it now appears that isn't going to happen, so i'm willing to ride out any counter-trend rally in the dollar..

For stability, I'll go with Francs. (FXF). I don't trust the Euros. For more risk, maybe Australian Dollars (FXA). I also own gold and commodities ETF, as well as some gold stocks. Some in Chinese infrastructure stocks like GSH, or mining stock like Brazilian RIO. One thing I am not doing is keeping my USD in saving account or CD.

what can you do about money in a 401k though? since they only offer stock funds, bond funds, or money market funds, your options are limited...

Lamont, it depends on your 401k. If it has any international funds, go with those. They should be invested in international companies with growth prospects. This is actually better than investing in a currency anyways, because if the company does well and the dollar stabilizes, you win. If the dollar crashes, you win.

Alternatively, you can put the money into large caps. When the dollar falls, it makes products by GE (for example) cheaper in foreign countries. This should in theory boost sales, which would cause the company to grow faster than the dollar falls. Other larger companies with international sales should produce similar results, hence large caps funds.

I just moved them all out to retire money market yesterday, going to stay put until this shitstorm is over. I am up roughly 10% so far, so I am going to wait. Yeah there's really not much you can do. You can quit your job and rollover to IRA.

A small word of warning, not all money markets are that safe. If they invested in housing (many did), the money market could lose money. It could actually do worst than other investments. Plus, it does not benefit from the falling dollar.

That said, many MMA are FDIC insured for up to about $100,000. Check that yours is insured for at least what you have in it. If not...

Oh well, it's 401k. I sure as heck not going to put it into company stocks. There's not much you can do really.

Historically, do individual investors do well when they time the market?

Sure, the dollar is weak, but then investors are going to purchase american goods. Look at Airbus. It's business is getting hammered by the weak dollar.

http://www.businessweek.com/globalbiz/c ... _companies

Is this something that could happen in other industries?

Taking the blue pill now.

Yeah but silver is subject to manipulation by the Loch Ness Monster (Nessie).

Taking the blue pill now.