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Minyan Mailbag - Dollar Exposure



Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.

Any thoughts, besides ETF's, on how to invest in other countries? If one believes the thesis that the American Dollar has further to fall, it seems to me that it makes sense to have a fairly large portion of investable funds outside the U.S.A. Any thoughts on how to do that would be greatly appreciated.

Minyan Duke

First of all you have to decide what you are trying to accomplish.

Your thoughts about the dollar are somewhat separate from an asset allocation decision, what assets to invest in. I think your main question is how to become less exposed to a dollar decline where as U.S. citizens our relative net worth will fall relative to other countries.

If you are bearish on the dollar you must decide what the relative performance of currencies will be: sell the dollar to buy what currency?

Countries with higher growth and higher savings rates should have currencies that will strengthen against the dollar. But I personally have decided that a better way to reduce my exposure to the dollar is to assume that all major currencies should weaken even though the dollar may weaken the most: all countries are running easy monetary policies by growing their money supplies aggressively.

I decided three years ago to put around 10% of my assets in gold as a way to be short all currencies, which I consider to be fiat. I have 25% of this exposure in gold physical and 75% in gold stocks.

I believe that putting a relatively smaller part of my assets in gold is more efficient than putting a higher percentage in assets denominated in foreign currencies.

Prof. Succo

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