If it's true, and a massive sell-off of the U.S. dollar is looming, how will you adjust and what will you do in response to a falling dollar?
Short the Dollar.... Invest overseas, Germany and Japan are due for a move up after 10 years of dormancy...they are showing signs of growth. Germans are finally getting accustomed to the Euro inflation changeover. What about US manufacturing for over seas markets...they'll be more price competitive.
BUY Short term UK Govt bonds, then when dust settles, sell them then get USA GOVT bonds. 2007 will be there year of multiple hedge funds going bust , stocks will dive, dollar will dive, .... But when there is a need for safety, BUY USA Govt bonds !
I just picked up some more Honda and Unilever. Given that Unilever is based in Europe and that Honda is based in Japan, are these effective hedges against a declining U.S. dollar?
Go get a job in manufacturing. US would make a nice offshore manufacturing base for exporters to the rest of the world, like we used to be....
Stocks are already diving compared to the rest of the world and we are still up y.o.y. US consumer wags the tail of the world markets. No one will chew off the hand that feeds them. Till the next major geopolical event times are good here in the US......
Oh good must be time to buy with everyone so bearish and calling for collapse, put me down as long USDCAD today @ 1.6000 I just love this 30 year chart.
many brokerages also allow you to choose a base currency, etc. if u REALLY think the dollar will dive (vs. say the euro), then simply keep your free cash in Euros in your trading account, instead of USD you will still get interest (if your brokerage pays interest) and your EURos will buy more and more shares even if the price of a stock stays the same, due to conversion rate or, you can simply buy a very small cash forex position. i don't do much forex, but i am hedged with a fair amount of commodities in my IRA, etc. also, there is an ETF that tracks the EUR/USD ratio - it is called FXE iirc
Another way to hedge a falling dollar is the traditional "run to safety" of the precious metals gold and silver. Both are in the midst of generational bull markets and both will benefit greatly by a declining dollar. Silver, of course, is much more volatile than gold and usually outperforms gold by a significant magnitude (in both directions). 2007 and 2008 should be great years for those playing the metals.
So, add to the dollar collapse scenario the inflation/deflation question. Here are my picks: PFBDX (pimco intl bond $ unhedged) MERKX (currency basket with some gold in it) TIPS, although you need to understand the investment as it gives protection against inflation AND deflation (principal guaranteed). add some international equities & US multinational large caps for a little kick too. Before you call me a twit for using mutual funds for this purpose, just remember my motto... if its good enough for Dick Cheney, its good enough for me. http://articles.moneycentral.msn.com/Investing/Extra/CheneysBettingonBadNews.aspx