I was also wondering why they picked the pound over the Swiss franc or Canadian dollar. England has a voracious consumer society too. I personally don’t have that same confidence in the pound.

I certainly didn’t mean to imply that the Bank of Italy knows what they are doing. History is full of poor choices made by governments.

But we should all be asking ourselves: if we are 100% in US dollars, what is our reason? Anyone who is holding only US dollars should have a list of reasons at the very least. I personally am investigating my options to diversify. Look at it this way: if you lived in Canada or France, you wouldn’t hold any dollar either. By owning only dollars and no Canadian dollars, are you doing this because you think that Canadian dollars are not as valued, or are you merely succumbing to convenience?

These are the reasons to hold dollars:
convenience, dollar will keep its value, foreigners will want to keep funding our trade and budget deficit, foreigners will keep buying our US Treasuries at the current rate, our economy will turn around and interest rates will stay high to entice foreigners to buy our debt. Any other reasons? How reasonable are these reasons anyway?

I am *not* giving investment advice, just asking people to question their cash holdings, and encouraging you all to have a good reason for each investment you hold. You ought to be able to write on a piece of paper at least 3 good reasons for each stock or cash position you hold.

I had a fun time recently looking through my folders, and finding my list of 3 reasons for each of my stock purchases in 1999. For example, I chose UPS because of rising business due to the internet growing, their share price was temporarily depressed due to a one-time tax charge (got this by studying their financial statements)and would go up the next year, and so on. I chose Lands’ End because of their best catalog marketing strategy, high quality of clothing, booming corporate clothing line, etc. They were later bought out by Sears. Both were winners. OTOH, I bought Lucent and Sanmina SCI because my friends had made a lot of money in it and both had just gone through huge price drops; I thought they were a good buy at those low prices. I had not studied either one, and had no good reason for owning either one. I lost most of my money on both. Thank goodness I knew they were gambles and only lost $2K on the internet stocks.

So, have a list of 3 reasons for each position that you hold. These reasons should pass the spouse test. If you can’t convince your spouse with that list, the list isn’t solid enough. This list-idea is from Peter Lynch.