How are you diversifying out of the dollar?
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?
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?
Comments
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.
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..
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.
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...
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?
Every time the market drops and then "mysteriously" rallies, knowing individuals look at each other and nod, seeing the handiwork of the PPT (plunge protection team).
Let's say it straight out. The plunge protection team does not exist. It is an urban myth. Let me step by step prove it does not exist, and see if we can learn something in the process.
Some excerpts from the savehaven.com article for those that are incapable of clicking and link and reading:
And he's totally right.
Haha, I get it. You're aping Maddox in his Loose Change parody:
Joke's on me I guess.
Nope. Every 5 months, siddha99 drops by to tell us all we are insane if we don't agree with all 7 of his conspiracies. Also, now that I have labeled them conspiracies I will be called out on this forum by a number of regulars. Especially if I include the Bilderberg Group when scoffing at the irrational fear some people have for conspiracies.