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Diversify Savings into Other Currencies & Overseas Assets

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Is it time to leave the U.S.? Look outside the borders of the U.S. for lifestyle and investment opportunities that save money, preserve wealth

With an unprecedented increase in federal spending, a record number of newly printed dollars entering the system, and the shrinking tax base, time is running out for savers, earners and investors who still have all their savings, salaries, homes and their investments denominated in U.S. dollars.  The U.S. economy looks grim…multi-billion dollar bailouts at taxpayer expense…billions of dollars in stock valueevaporating overnight…dried up credit…collapsing mutual funds…disappearing retirement accounts.        As someone focused on all things financial, I believe we all owe it to ourselves to constantly explore all options that can help grow and preserve our assets.  One option that’s become increasingly attractive for some Americans is to get out while you still can.  This is especially true for baby boomers and, for that matter, anyone looking at long-term financial planning and retirement options.  It makes a lot of sense to diversify savings into other currencies and overseas assets.  It also makes a lot of sense to search for new areas of opportunity beyond America’s borders.        There’s never been a better time to leave the United States in our 234-year history. These are things you probably won’t read about in the mainstream media.  But, each day, more and more savvy Americans are joining the ranks of retirees living like royalty – but on tiny budgets.  They hope to enjoy a million-dollar retirement without touching their savings.  It’s an approach most people don’t know much about, yet it’s easily accessible to most Americans.       I suppose I run the risk of being called “unpatriotic” or offending some people.  This is nonsense.  The American Dream is all about people having the right to seek out opportunities, go wherever they want and create their own destinies.  It’s only logical that some investors will search for that original America elsewhere in the world.  While not suitable for many people, from strictly a financial viewpoint, it’s worth serious consideration.      Two threats are increasingly eroding our investments and savings: inflation and higher taxes. America now spends far more than it earns in tax revenue.  To close this gap, Washington does two things: it borrows more dollars and it prints even more of them.  Almost every president since World War Two has adopted this irresponsible fiscal policy; but the Obama Administration has escalated the scale of this effort to a staggering and perhaps irreparable level.  The amount of U.S. government debt forced into the hands of the public has risen by $3.62 trillion in just over two years. That’s an increase of 61%!   Meanwhile, over the last four years, Ben Bernanke has managed to create out of thin air 60% of the entire monetary base of the country.  This is bad news for the U.S. dollar.  That’s because the more dollars theFederal Reserve creates, the less each dollar is worth.  The dollar has already lost 95% of its buying power since the Fed was created in 1913.  Given the unprecedented increase in dollar creation over the last four years, many economists expect each one of today’s dollars to hold onto just half their current buying power by 2020.    Couple this inflation threat with the 100% certainty of higher taxes in the future. If you earn $62,068 or more, you already pay 80% of everything collected by the IRS.  But at the other end of the scale, about 50% of adult Americans don’t pay any taxes whatsoever.  This shrinking tax base will forceWashington to collect more of the tax take from those who already shoulder most of the tax burden.  Anything else would be political suicide.    There are really only two ways to improve your long-term financial position:  1) Grow your assets faster than inflation and taxes can erode them; or 2) Dramatically reduce your expenses. Stocksonwallstreet.net focuses on equity investments — but it’s going to become increasingly difficult for investors in U.S. equities to stay ahead of the game in the tumultuous brave new world that lies ahead.  So, here are a few alternative investment strategies worth considering:
  • Smart investors have already positioned themselves for the inevitable when the dollar fails.  They’ve diversified into non-dollar denominated investments, and there are a lot of them to choose from. Stocksonwallstreet.net regularly discusses equity investments overseas and in emerging markets, so I won’t dwell on that here.
  • Invest in foreign currencies directly.  Currency investing can be tricky and volatile, but in countries like Japan and Hong Kong, financially savvy housewives are heavy day traders of currencies.  There’s no reason Americans cannot do the same.  Just beware and educate yourself well before diving in.
Some smart investors take the guesswork out of currency investing with something called a ‘BRIC CD’.  This is simply a certificate of deposit that buys currencies of the world’s four most up-and-coming economies: Brazil, Russia, India and China.  Upside for the CD is any gains these currencies on average make against the dollar.  The downside?  There really isn’t one . . . the BRIC CD is capital guaranteed.  No matter what the four BRIC countries do during the term of the CD, your initial investment is preserved.  You get at least 100% of your investment back at the end of the term even if there’s no appreciation in value of the BRIC currencies.
  • Another strategy is to invest in real estate that’s bought and sold in a currency other than the dollar.  For example, Brazilian real estate is traded in the Brazilian Real, a currency that’s very strong and will probably get stronger as the dollar declines.  However, overseas property investments can be fraught with scams and fraud, so buyers beware!  A lot of foreign investors have been burned in places like the overheated Shanghai property market.  Given the pitfalls, this is not an investment option I’m not particularly keen on.
  • The erosion of the dollar can also make the value of the currency part of the equation in determining where to retire.  In many places around the world, you can enjoy an upscale but low-cost retirement…a wonderful high-quality lifestyle for a fraction of what it costs at home.  There’s never been a smarter time to explore.  There are already 7 million Americans abroad for whom the American Dream has simply been priced out of reach.
There are places you can still own your own home or beach house and enjoy appreciation of 20-60% per year…where world-class health care won’t send you to the poorhouse…where the government doesn’t involve itself in every aspect of your personal life…and won’t even charge you taxes.  A house on the beach, a mountain villa, or a super-modern city condo can cost 50-75% less than it might at home.  Same goes for the overall cost of living.  A week’s worth of groceries, dinner at a fine restaurant, a night at the symphony, even full-time household help – like a maid or a gardener – can cost pennies on the dollar.   U.S. citizens and green card holders cannot legally escape the IRS no matter where they live.  But there are places where you’ll pay little or no local income or sales taxes and where property taxes are laughably low.  You can dramatically reduce your cost of living by as much as 80% and still live a high quality lifestyle — places likeEcuador, Costa Rica, or Panama and Mexico which are within a 3-5-hour flight of the U.S.  And it’s not just old ‘geezers’ who are looking at overseas retirement.  Many savvy young Americans have already positioned themselves for the inevitable when the dollar falls — spending years researching countries for overseas retirement to ensure they can preserve or extend their hard-earned assets.   So I say:  Go. Strike out.  Smart investors need to shield themselves from disaster when the dollar falls.  It takes a global outlook to be able to find and evaluate them.  Look outside the borders of the U.S. for lifestyle and investment opportunities that save money, preserve wealth and take advantage of global events that many in the U.S. never even hear about.Don’t be a stranger leave a comment below and let me know what you think or send them to my Twitter. Also remember to sign up for Stocks on Wall Street’s Monthly Newsletter.


Disclosure: "No Positions"