Tuesday, September 23, 2008

Five Easy Ways You Can Diversify Away From The Dollar

Note: This article was also picked up by Seeking Alpha.

I personally fear for what may happen to the dollar over the next several years - I don't see any way these government bailouts will not result in an excessive printing of US dollars.

Faced with this reality, I know that many people who share this concern are also unsure how exactly to diversify away from the dollar. The past 25 years of investing history have been all about stocks and bonds, all denominated in US dollars, for most US residents.

Fortunately today, we have some great investment options available to us that were not around even a few years ago. Here are five easy ways you can diversify out of the dollar:
  • Open a savings or CD account with EverBank, denominated in one or more foreign currencies. I personally recommend the Japanese Yen, Swiss Franc, Chinese Renminbi, Singapore Dollar, and Australian Dollar as some of the more solid currencies.
  • Buy an ETF - you can do this from the comfort of your brokerage account. A few that look attractive right now: GLD, SLV, UNG
  • Buy natural resource stocks. I think gold and silver mining companies, along with natural gas producers, look particularly attractive at current prices.
  • Buy infrastructure companies. The world's infrastructure is a mess right now - there is a lot of upgrading to do. One example of a company focused in this space, which I own, is Brookfield Infrastructure Partners (BIP).
  • Short long-dated US Treasuries. It's very unlikely that the rest of the world will continue to lend us money at 3%+ while our government spends it like drunken sailors. Interest rates are going to go up in a big way. There are several ETFs that inversely track interest rates - DXKSX is the one I own, because it provides 2.5x leverage.

And a bonus pick - it's not as easy as the suggestions above, but it's not nearly as hard as most people picture. I would highly recommend:
  • Start buying actual commodities via a Futures account. It's not as risky as you think, especially if you limit your use of leverage - it's the excessive use of leverage that does people in. I have this account through Farr Financial. Recently, I've opened up a couple other accounts - one with Interactive Brokers, and the other with RMB Group.

5 comments:

huh? said...

Nice blog I really enjoying coming here, question for you though: do you trade options? and if not why?

SugarHigh said...

Thanks - I do not trade options, and for no particular reason other than I don't have a thorough understanding of them right now.

Moyo said...

Friend....this is very appropriate. There actually is absolutely no way that the government will not start erratic printing of the dollar. The confidence (or stupidity) at which the money is being spent, the only feasible way i see currently to recoup what has been spent is by increased printing. I talked about this on my blog also....

Buying actual commodities (gold, silver to be precise) is hitting the nail on the head and should i add to your readers:

1)If you dont have enough money now to buy, consider pooling with family members and make it a tradition to buy as frequently as resources can be pooled

2)attack debt aggressively, and treat it like a plague. The country as a whole is in huge debt, and so are many Americans.
The philosophy of using debt as a leverage doesnt seem appropriate in times like this, that principle is most efficient in booming economic times

market folly said...

i know this post is older, but hopefully you'll still see this comment. love the shorting treasuries play and just wanted to make you aware of 2 other vehicles available in the stock market: PST is double short the 10 yr and TBT is double short the 20 yr.

been long TBT for a few weeks myself. here's a post on it: http://www.marketfolly.com/2008/11/treasuries.html

Brett Owens said...

Awesome, thanks for the tips and the link.

Treasuries sure were weak today, on a day you'd have expected them to skyrocket.

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