Share your currency or cash portfolio

[Wiley]

Hey PS,

Why don’t you buy him Jim Rogers book Hot Commodities. He has a real talent for cutting out all the noise and explaining things very well. Also his track record speaks for itself. I really like him because of his real world experiences (internationally). I only follow guys that are the real deal and he is one of them.

Wiley

[powayseller]

I read that book, but I believe commodities will take it on the chin, as they do in recessions. After the recession, will they take off again? Also, Jim Rogers has a commodities index fund that he started, which he is promoting by writing the book. Asking Jim Rogers about commodities is like asking David Lereah about buying homes. I am a skeptic of Rogers. I posted recently how much commodities got trampled in the 2000-2001 recession (which was mild and was only a capital spending recession), so in this consumer led recession the commodities will get hammered. How much copper and lumber will we need when housing construction falls 75%? THat is why I’m not a fan of Tim Iacono’s site, TheMess; he is a bull on commodities and I just don’t share the view that commodities are in a bull run. We’ve got a recession to work through. Maybe after that, commodities will take off. I just don’t know.

[Wiley]

I think your view has merit. However I’m a believer that three main things will continue to drive commodities…

Worldwide increase in money supply
Asian/India boom
Loss of faith in financial assetts (instability, corruption, etc.)

and I guess I’d throw in the cycles say its time.

and perhaps supply deficits due to them being out of favor for so long and not receiving investments into infrastructure, etc.

I went over three didn’t I?

So to stay on topic I’d say we’re about 60% commodities: futures on grains/gas, physical in gold/silver, as well as stocks on commodity based companies, the rest cash. No real estate. Some shorts on the market.

Oh and on Rogers he has a very long and successful track record with his own money. He also made a very timely prediction on the Argentinian peso before it collapsed for which he was ridiculed until it came true a month later. I don’t know for a fact but I would bet money most of his money is somehow invested in commodities.

[rseiser]

Poway,
thanks for the suggestion. With your being afraid of buying gold and commodities, I totally understand. But you have to strike a balance. Your balance is 5% gold. Better than 0%. How about other commodities doing well in a recession? You could put say 3% in agriculture, 3% in food, 2% in silver, 5% in oil. Those things did well in the 70s which was also a recession (inflationary albeit). Of course you can put it in companies including international ones that are involved in these sectors and also paying dividends like Peter Schiff suggests. I was always curious how it is to have an account with him, but he says the right things: That getting dividends in foreign currencies compounds and makes it easy on taxes if you keep the stocks long.

By not putting 95% in gold (or even buying short funds) you are definitely saying that you have more confidence in the dollar being preserved than gold. But I would just look at the evidence as currently presented: You get 5% on your dollar which is maybe 4% after tax. At the same time money supply numbers, price increases, future obligations, war spending, it all points to a total of 7-10% loss annually. So you are losing 3-6% almost garanteed, and it could be more and rising. Other certain assets might in theory only lose 0%, provided they didn’t have a big runup. Would you put 95% of your money in something losing 5%, and only 5% in something you are afraid of losing what? 10, 20, 50%? Who knows. Maybe they gain 30% annually like they did in the 70s. So the chance looks more like centered around 0% than around -5%.

I guess you could have more confidence in foreign currencies and try and get interest there. But again you have to look at the present facts and their governments. If they pay 6% interest and have money supply numbers of 5%, that sounds better, but it still doesn’t make you any money. It could also lose you money if that government decides to join the dollar devaluation, say the Europeans like the Euro at $1.20 better than at $1.33. What are they gonna do? They won’t force the US to take 10% of dollars out of circulation. They will just print 10% more Euros themselves. But some foreign currencies would be still reasonable diversification.

It’s all conjecture on my part, but look at the evidence. Is the government honest in their spending? Are they giving accurate numbers? Is your interest rate outpacing your price increases?

[Wiley]

"he remembers the volatility over the years"

me thinks he bought gold Jan 1980???

[qcomer]

Another thing about commodities is that technology is always working to to make finding new resource pools,better refining ways,finding alternative materials,etc and this works against commodities in the long run. I also discounted buying gold when below $60 because inflation numbers were down but now this dolar weakness is pushing gold/oil/silver. Did anyone noice that oil is quitely back up above $63 and seem to be breaking out of its around 60 range. If it keeps going then inflation may creep back up and Fed won’t be able to cut rates by March (which is what is driving the dollar weakness in short term).

BTW, another way of hedging against dollar maybe to invest in major exporters from the US. But I couldn’t find any stocks of big exporters that haven’t already moved in last 3 months. Any recommendations here? I tried to directly buy aussie/nz bonds from my broker(Schwab) but the fees are just too high. I think of international stocks as diversifying equity but not fixed income. International stocks are not hedge against dollar because most of these companies export to the US and will get hurt from weaker dollar and economic slowdown in US.

[Wiley]

qcomer,

MCD. Nice multiple reverse head and shoulder patterns. Don’t own it and don’t know its financials but definately and international player.

The dollar is toast. Buy gold.

[bubba99]

The dollar dropping against other major currencies has been discussed in this forum many times. PS did a thread on other major players (China, Japan, UAE) diversifying out of their dollar reserves. China alone had almost a trillion in dollar reserves. They have been saying this for years and now have actually begun to move. In the last month or two the dollar against the Euro has dropped from .78 to .75 and will probably continue dropping.

Along with the diversification out of dollars, we have the FED printing money at the rate of 1.1 trillion per year. The dollar is headed down. How fast is hard to gauge because the FED stopped reporting M3 money supply, the piece that includes all the new dollars to pay US consumer debt. The dollar was a strong currency but now . . .

I am all in Euro bonds – German government and the Netherlands. To date 3% return in that last month because of dollar decline.

[(former)FormerSanDiegan]

BTW, another way of hedging against dollar maybe to invest in major exporters from the US. But I couldn’t find any stocks of big exporters that haven’t already moved in last 3 months. Any recommendations here?

qcomer, here’s my take … if you think the dollar will fall further, buy the majors exporters that have already moved. If you are looking for companies that haven’t responded to the most recent drops in the dollar, why do you think they might fall when the dollar drops further ?
My advice, take the ones that have already responded to the current decline of the dollar. Sure you missed the recent move, but if you expect it to move further go with the trend. If a major exporter hasn;t responded to the dollar drop, it’s probably because the company is weak for other reasons.

[powayseller]

bubba99, how did you invest in euro bonds? I’m interested in euro government bonds.

What about swiss francs? The Swiss dropped their backing to gold, so is the swiss franc still as good without the gold backing? I once saved this link about investing in Swiss banks, but don’t remember where I got it.

[34f3f3f]

I moved to the US a couple of years ago, and took advantage of the weak dollar, by exchanging about two thirds of my portfolio. I had hoped that the gains would offset the house price inflation. However, house prices have continued to climb and the current dollar rate would prevent me from returning to Europe. I am glad that I saw wise to keep a chunk in other denominations. Your 20% exposure is hopefully going to serve you.

Regarding Swiss banking, I cannot recommend it. Things have changed since 9/11. For example, Credit Suisse, the second biggest bank in Switzerland, can no longer take intructions from US residents. You would have to fly to Canada or Mexico every time you wanted them to do something. I was also grilled in Zurich airport by an US airline (much to my chagrin), as to what I was doing there. Other people’s experience may be different, but my experience of banks in Europe (I am European) over the last few years, is not good.
Banks in the US seem much less flustered and less paranoid.

Account opening formalities in Europe have become quite vigourous and intrusive. Switzerland has also had to bow down to pressure to accept the EU Savings Directive. Mr Bush also issues administrative subpeona’s to collect huge swathes of swift transfers (international wires), in an attempt to capture terrorists’ movement of funds. I believe this is illegal, and it has had the unfortunate effect of making banks naturally rather jumpy. The new climate of coercive openess has, in my view, resulted in a little retaliatory attitude.

You don’t need a foreign bank account to get foreign currency exposure. Buy if you want one, then avoid HSBC, the new kid on the block. They promote easy foreign account opening procedures if you open an account with them in the US. I tried them but after six months nothing happened. Citibank took just two weeks, and no complaints so far.

[powayseller]

What did you buy with Citibank?

[34f3f3f]

I buy dollars from sterling, as and when. I am not trading in currencies.

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