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This Saturday I got a call from my uncle. He lately switched jobs and now runs a small electrician's office. In the flurry of new paperwork, he realized his 401K was still sitting at his old employer. He made a decision to roll it over to his new employer.
He's a smart guy. And he has been able to save rather a lot of money.
We then targeted our consultation on where he should invest now. I am not a fiscal planner, but with more than ten years of experience on'Wall Street', I know the markets pretty well.
I started considering hedge funds, ETFs, stocks, bonds, the list goes on and on.
So I started to break them down one by one:
Growth in China, The Recession, The Bank bailout, the breakdown of Housing, Inflation, Deflation
So which is the most important? What ideas should we be paying the most attention to? It's not only my uncle, it's everyone.
Then it hit me.
Reaching into my pocket, I pulled out a brand-new crisp twenty-dollar bill. And that got me thinking. The US dollar will generally be one of the most important influences over our investments for the subsequent five to 10 years. Not many financiers focus on the US Dollar but I do... And I know just how powerful it can be.
What do I mean by that?
I think the US buck is teetering on the cliff of destruction. I am going to tell you why. Then I'm going to tell you what happens when the US Dollar falls.
First, why will the US greenback fall in value?
That one is simple... With a lot of complex reasons. The clamor for US bucks changes every day. It is the world's reserve currency so it's used around the planet for business transactions of all types.
A few months back, requirement for the dollar went thru the roof.
With demand dropping, so is the value of the US Dollar. But that's not all.
Before the recession, the Fed Reserve was holding the money supply comparatively stable. Now with the recession in full force, the government is giving away free money. It seems anyone that can make their way to Washington and still have a heart beat is getting a handout. ( infrequently I believe the heart beat is optional - anyone can get free money. )
Trillions of bucks are being spent by our government.
Naturally not. They are simply printing more money. It's nice when you have the key to the printing press!
Remember all the money the US Treasury gave to the banks?
They just wired in a trillion bucks ( give or take ) ... No need to print anything. No tangible money changing hands... Just poof.
Which also depresses value.
If you follow my logic, you'll realize the US buck is sure to slide in value.
I can think of 100 ways... But I haven't got sufficient room to describe them all.
Take some of your hard earned US greenbacks and invest them in foreign retirement funds or ETFs. Think about it... By buying foreign investments, you basically convert your US dollars into a foreign currency. Even if the investments break even, once the US Dollar starts falling, you can be making money.
For example, i happen to love the idea of investing in China. They have one the speediest growing economies on the planet. Capturing a tiny part of that expansion will do wonders for your portfolio. One China-focused ETF I like is the iShares FTSE/Xinhua China 25 Index ( FXI ). This ETF holds 25 of the biggest and most liquid Chinese companies.
Take a fast look. I think you will be impressed with the potential it provides. As well as the expansion exposure to China, it also helps protect you from the falling price of the US Dollar.
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