Jimmy Rogers, Warren Buffett, Joseph Stiglitz and the sages at Pimco all have been saying the dollar is on the way down. That's coming from a pretty broad range of interests. So if everybody's saying, get out of the dollar, where do you go?
If I'm a foreign investor, I might be reluctant to hold stocks denominated in a currency that is weakening against my own.
If I'm a U.S. investor, maybe I don't care. The U.S. economy may be weakened, but it's still standing. Pick the right companies, and you might do OK even in a volatile market.
What's the alternative?
BRICs? They're at the mercy of hot money and heavy government hands. Commodities? A natural choice in a time of inflation -- but insanely volatile.
Let's say I'm a cowgirl who nails every top and bottom with my pearl-handed Colt sixshooter and is ready to ride out of Dodge, BRICs, U.S. stocks and commodities at the sound of gunfire. I still might want to stash some coin in CDs.
Unless I call market tops and bottoms just right (and there are plenty of annoying people who claim to have done so), I've probably lost some money over the last two years. CDs may not pay much, but at least I don't lose much. Citigroup is paying 2.25 percent for an 18-month note, and a friend of mine just got 2.5 percent for the same duration just by walking into the bank.
But all these smart people are telling me to get out of dollars...gee, what do I do? Frankly, I'm too stressed out by the market to make a choice right now.
3 comments:
George S*r*s said in the Alchemy of Finance (page 144) "I believe that a system of fluctuating exchange rates presents an existential choice. One cannot avoid having one's equity in some [emphasis added] currency, and not making a decision about currency exposure is also a decision ...".
What you wrote reminded me of this.
Laurel,
Have you thought about mortgage-backed securities? :)
Or perhaps the Canadian dollar. It's not a bad gig these days of you don't mind investing in and with "loonies". (You might want to check in on the neighbours next-door once in a while to see what's up with oil on that one.)
Cheers,
George
After some thinking inspired by this post I decided that in my long term (not trading) portfolio I should have some exposure to Japan. Not only is it a natural refuge if the US experiences high inflation (which BTW I still don't think is likely) but the new govt of Hatoyama-san is moving in the right econ. direction and this may boost the Yen. I'll buy a very small amt of VPACX or VPL to get started.
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