5 Ways to Diversify Away from the Dollar

I personally fear for what may happen to the dollar over the next several years - I don't see any way these government bailouts will not result in an excessive printing of US dollars.

Faced with this reality, I know that many people who share this concern are also unsure how exactly to diversify away from the dollar. The past 25 years of investing history have been all about stocks and bonds, all denominated in US dollars, for most US residents.

Fortunately today, we have some great investment options available to us that were not around even a few years ago. Here are five easy ways you can diversify out of the dollar:

• Open a savings or CD account with EverBank, denominated in one or more foreign currencies. I personally recommend the Japanese Yen, Swiss Franc, Chinese Renminbi, Singapore Dollar, and Australian Dollar as some of the more solid currencies.

• Buy an ETF - you can do this from the comfort of your brokerage account. A few that look attractive right now: (GLD), (SLV), (UNG)

• Buy natural resource stocks. I think gold and silver mining companies, along with natural gas producers, look particularly attractive at current prices.

• Buy infrastructure companies. The world's infrastructure is a mess right now - there is a lot of upgrading to do. One example of a company focused in this space, which I own, is Brookfield Infrastructure Partners (BIP).

• Short long-dated US Treasuries. It's very unlikely that the rest of the world will continue to lend us money at 3%+ while our government spends it like drunken sailors. Interest rates are going to go up in a big way. There are several ETFs that inversely track interest rates - DXKSX is the one I own, because it provides 2.5x leverage.
  

And a bonus pick - it's not as easy as the suggestions above, but it's not nearly as hard as most people picture. I would highly recommend you start buying actual commodities via a futures account. It's not as risky as you think, especially if you limit your use of leverage - it's the excessive use of leverage that does people in. I have this account through Farr Financial. Recently, I've opened up a couple other accounts - one with Interactive Brokers, and the other with RMB Group.

Comments

[you_can_cal...:]

Thanks for the article. This same thought has been on my mind, and I've been wondering how to hedge myself.

Couldn't agree more about the world's unwillingness to lend us money at such ridiculously low rates. My God. Of course they'll get paid back, but in dollars that have a hell of a lot less purchasing power than the one's we're using today. Gee, do you think Chinese economists understand that? I'm kinda guessing they do.

2008 Sep 24 08:57 AM

[ripskii:]

All prudent investors must consider this problem for the reasons outlined here. Another way to short longer term treasury bonds is with the TBT, an ETF.

2008 Sep 24 10:26 AM

[night:]

etf's for foreign currency...
FXE euro
FXB pound
FXF france
FXC canada
FXM Mexico
FXY yen
FXA austrailia

2008 Sep 24 11:06 AM

[cynical and...:]

I don't know what drunken sailors have ever done to you to earn such an insult. When it comes to spending, drunken sailors are complete pikers as compared to the current administration.

The current administration has rung up 4 trillion dollars in debt in the last 7 years. 720 Billion in the last twelve months.

2008 Sep 24 11:53 AM

[Mr.G:]

great article all great ideas

2008 Sep 24 12:29 PM

[royial:]

Thanks. Good article

2008 Sep 25 02:30 AM