Dollar Denominated Assets: Get Out Now

The best investment decision you can make for the next decade? Get out of dollar denominated assets.

Where you place your assets will be more important than ever as returns for many asset classes narrow.

Whether you move into Asian based currency, (the yuan, the Singapore, Hong Kong dollars) Asian based ETFS - iShares China (FXI), Hong Kong (EWH) Singapore (EWS), South Korea (EWY) or Taiwan (EWT) or hard assets that are stores of value, we don’t care. A mix is best.

We’re mildly positive on gold. The problem with gold is that 95% of the market is in derivatives. Other hard assets have been turned into derivatives as well through ETFs, leverage and structured instruments. After Wall Street gets everyone into the hard asset pool, the result won’t be any different than the meltdown of financial markets through financial engineering in 2008-2009.

Sound Cynical? You bet!

We like hard assets that can’t be duplicated. Of course, brokers and Wall Street can’t recommend these because they can’t make any money from them.

We know the art market well and are seeing buying opportunities for important Old Master’s works at $50,000 and up. Unbelievable. These works should be selling in the 7 figures. We’re talking British landscapes, 12^th-14^th century Italian Renaissance work. Now is the time to put together a collection on the cheap.

Art historical leaders are reporting that people are buying art as a refuge. A refuge against the dollar, the euro, equities. Tremendous liquidity is looking for art. Demand is increasing and supply is diminishing,

Sotheby’s (BID) stock, the only public pure play, after hitting a low of $6.05 is broaching the $12 level after announcing additional layoffs and a dividend cut. The shares are attractive, as expectations have been wrung out.

Disclosure: No positions

Comments

[Steve in Gr...:]

Thanks, Ms. Diamond, for the note.

The headline says it all. With Bernanke's debasement of the USD, dollar-denominated assets (bonds, annuities, etc.) with long maturities are going to get hammered over the next decade as inflation kicks in.

The retail investor is scared and many are moving into annuities as a safe haven from a volatile and manipulated equity market. What a disaster.

May 05 11:09 AM

[Analyste de...:]

I agree with the overall message here ("Diversify beyond electronic assets while you still can!"), but the communication isn't entirely successful. Financial advisors have done themselves a huge disservice catering to their own narrow interests over the client's - now we all need to be much more frank and explicit what any & all investment risks might be. Clients' cynicism demands it.

While I fully agree fine art & high-end collectibles might be a valid diversification, anyone suggesting unorthodox strategies (include bullion here) should produce an iron-clad case without the garbage-chatter that hyped stocks for the past few decades.

The message & delivery MUST change. Sorry.

May 05 12:41 PM

[fw:]

When you say:

"Other hard assets have been turned into derivatives as well through ETFs, leverage and structured instruments. After Wall Street gets everyone into the hard asset pool, the result won’t be any different than the meltdown of financial markets through financial engineering in 2008-2009"...

... do you mean that commodities will be bid up to prices such as $200/barrel of oil, only to drop again?

Thanks for further clarifications here.

May 05 03:17 PM

[john redmond:]

Debra, You're as smart as you are beautiful. I look forward to more of your wisdom.

May 05 06:26 PM

[totheabovej...:]

she's tight with Soros' clan so of course it is all about china and burn the benjis

but I'll follow her since i rather hear this point of view from her than old frog soros

I've been telling people to buy art for the past year.. i don't have the coin for it but i do have the wall space.. can I lease some?

May 05 06:48 PM

[capt Brian:]

better check your art market, Chinese Art has plummeted, not gonna has done, other worldly art may not be sought after as folks need cash.

Best bet for long term has been art, antiques, then the PM's but this time, looks like PM's will fare the best.

My target is to wait for the ETF to come out in Plat and Pall'm, buy in heavy, asap, as people see it as an alternative to gold and silver, it will be bet on heavy because JUST in case we are wrong, and our 'lord governors' are doing the right thing, or even if it is the wrong thing and it works, then Plat and pall will be needed in industry, so you may have a neat situation of being on both sides, look what plat did during the last stock rush, ($2200.00) Palladium is next, read about it and see it works like Platinum.

Where if we do recover, then gold will be shelved once again,silver not far behind, but the two other silver metals should do okay enuff to make it worth while.

Lastly I think numismatics have lost their punch, and aree closer to face value than ever before, most coins equal the same price in the Red Book that they did in 2000, So... Numismatics may be a good choice after you have a stash of Plat, and Pall.

Just a thought.

Capt Brian
Trying to navigate in the fog thru a reef at low tide with a storm coming at sunset. gulp


On May 05 09:06 AM morph366 wrote:

> Art & Antiques is an overlooked asset class - but obviously liquidity
> is a big issue.
> There do seem to be real opportunities in antique furniture and traditional
> paintings e.g. British landscapes -- but question is do these appeal
> to the aspirational demographic?
>
> Anecdotally it seems like contemporary art may have topped out at
> least for some time.

May 05 07:23 PM

[capt Brian:]

Whose country are you a citizen of? Have you got any positive input? Maybe a good annuity from Met Life, or perhaps some nice save T bonds bills or notes? If they go then whatever you bought whereever you bought is history girl.

You are talking almost treason, like some of our politicians and media I have had the unpleasant duty to follow recently.

Maybe it is time to look for things to do to help America instead of migrating to Russia or China or India. Wait, good idea, why don't you go there, I'm sure we can raise the air fare, IN RENMINBI OR RUPLES OR OR OF OR

Any chance of you taking Nancy or Bernie or or or with you?

Capt.
Beware of sheeps in wolf's clothing..

May 05 07:32 PM

[RiskReturnO...:]

Real estate in Taiwan is about to jump up, now that mainland Chinese money is allowed to invest in real estate. No easy way for US based investors to participate, but EWT can probably do the trick. Another vehicle could be TAO, which invests in Hong Kong based real estate companies, which may join the Chinese money into Taiwan.

May 05 08:38 PM

[one eye:]

Don't forget to buy only from accredited dealers.

I can sell you an old Persian rug, lets see, where did I put those rugs?

May 06 12:52 AM

[Pouncer:]

With reference to Gold, this means that most investors hold gold as a paper asset (Gold ETF) rather than owning physical gold. Most gold investors are concerned with the perceived hassles or extra cost associated with holding the asset in physical form - like storage, insurance, buy-sell spread, liquidity, etc.

You may want to look at this reputable option to own allocated physical gold that addresses all of te above issues:-
live.bullionvault.com/...



On May 05 03:17 PM fw wrote:

> When you say:
>
> "Other hard assets have been turned into derivatives as well through
> ETFs, leverage and structured instruments. After Wall Street gets
> everyone into the hard asset pool, the result won’t be any different
> than the meltdown of financial markets through financial engineering
> in 2008-2009"...
>
> ... do you mean that commodities will be bid up to prices such as
> $200/barrel of oil, only to drop again?
>
> Thanks for further clarifications here.
>

May 06 01:25 AM

[HumbleBee:]

YOur article makes sense, generally.
Like to caution that HK$ is still pegged to US$, thus need to be mindful , until pegged to some other formula.

May 06 11:40 AM

[Debra J. Di...:]

I like the metals. You can buy the futures, deleverage them and go out as far as you can in the contracts.


On May 05 08:46 AM yellowhoard wrote:

> Silver, platinum or palladium are the best bets now.

May 18 10:47 PM

[Debra J. Di...:]

Commodities are subject to many forces that are beyond the realm of the dollar( weather, shortages, political issues) so you need to be careful.


On May 05 08:59 AM Pauly B wrote:

> Commodity plays are not always bad either. Dollar goes down, commodities
> go up.

May 18 10:50 PM

[Debra J. Di...:]

Rare assets are definitely worth considering. Make sure you do your homework and buy the very best example of work that by a historically significant artist. Liquidity is less of an issue for the very best examples.


On May 05 09:06 AM morph366 wrote:

> Art & Antiques is an overlooked asset class - but obviously liquidity
> is a big issue.
> There do seem to be real opportunities in antique furniture and traditional
> paintings e.g. British landscapes -- but question is do these appeal
> to the aspirational demographic?
>
> Anecdotally it seems like contemporary art may have topped out at
> least for some time.

May 18 10:52 PM

[Debra J. Di...:]

Of course the US is not shutting its doors for good. But the damage that has been done to the dollar will have repurcussions for all US based assets that will make the road ahead more difficult.


On May 05 09:25 AM captainccs wrote:

> Debra, are you saying the US is shutting its doors for good? You
> mean the world's largest economy is shutting its doors for good?
>
>
> If you don't have a liquidity problem, Old Masters could be a very
> good investment, indeed. But the rest of your opinion hold no water.

May 18 10:54 PM

[Debra J. Di...:]

Oil is a commodity and it will continue to become more expensive in dollar terms as the world expands.
Stocks vs. art is not a binary decision. Each asset has to be evaluated on a case by case basis.


On May 05 10:19 AM sickofthehype wrote:

> You been to China recently? Wow. Long way to go over there, and
> I mean a LONG LONG way to go.
>
> Oil is priced in dollars and I got in mid January - just watching
> things bloom now. I'll take a ton of oil stocks over a painting
> that can't be liquidated quickly.. thanks for the advice though.

May 18 10:57 PM

[Debra J. Di...:]

Allan
Give me a break.IF you're dumb enough to do that, then I can't understand how you got so many followers.


On May 05 10:51 AM Alan Young wrote:

> I love the "we don't care" part. I'll just trade my US$ for-- hmm,
> Icelandic Kronen? Zimbabwean dollars? It's nice to know it doesn't
> matter.

May 18 10:59 PM

[Debra J. Di...:]

You're welcome.
Right on


On May 05 11:09 AM Steve in Greensboro wrote:

> Thanks, Ms. Diamond, for the note.
>
> The headline says it all. With Bernanke's debasement of the USD,
> dollar-denominated assets (bonds, annuities, etc.) with long maturities
> are going to get hammered over the next decade as inflation kicks
> in.
>
> The retail investor is scared and many are moving into annuities
> as a safe haven from a volatile and manipulated equity market. What
> a disaster.

May 18 11:00 PM

[Debra J. Di...:]

I am happy to have a conversation off line to further clarify the points. There is a limit to the length of the pieces on seekingalpha.


On May 05 12:41 PM Analyste de Boston wrote:

> I agree with the overall message here ("Diversify beyond electronic
> assets while you still can!"), but the communication isn't entirely
> successful. Financial advisors have done themselves a huge disservice
> catering to their own narrow interests over the client's - now we
> all need to be much more frank and explicit what any & all investment
> risks might be. Clients' cynicism demands it.
>
> While I fully agree fine art & high-end collectibles might be
> a valid diversification, anyone suggesting unorthodox strategies
> (include bullion here) should produce an iron-clad case without the
> garbage-chatter that hyped stocks for the past few decades. <br/>
>
> The message &amp; delivery MUST change. Sorry.

May 18 11:01 PM

[Debra J. Di...:]

No, I mean that when a new idea is seized upon by investors, Wall Street will continue to invent new products that will ultimately destroy the investment thesis. Wall Street's( if there really is a Wall Street left) strategy is to make money for itself, not the investor. The Street has a penchant for exagerating anything on both the upside and the downside, so investors need to be careful.


On May 05 03:17 PM fw wrote:

> When you say:
>
> "Other hard assets have been turned into derivatives as well through
> ETFs, leverage and structured instruments. After Wall Street gets
> everyone into the hard asset pool, the result won’t be any different
> than the meltdown of financial markets through financial engineering
> in 2008-2009"...
>
> ... do you mean that commodities will be bid up to prices such as
> $200/barrel of oil, only to drop again?
>
> Thanks for further clarifications here.
>

May 18 11:07 PM