Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

A Portfolio for Dollar Bears


Where to put your money if you're betting on the greenback's continued decline.

Perhaps the only real surprise from the Fed's post-meeting statement yesterday, market pros note, is that there was no surprise at all.

So says Dennis Gartman, editor of The Gartman Letter. As the veteran trader points out, the language in the statement was the same; the vote was unanimous; the target rate on fed funds was unchanged; the statements regarding the state of the economy were similar.

"We might all have been better served by the Fed not having met and having instead issued a statement along these lines: Been There; Done That; Doin' It Again," wrote Gartman in his daily missive.

Ben Bernanke and his team of central bankers reaffirmed their position that interest rates will remain "at exceptionally low levels for an extended period of time," which is bad news for the dollar.

Indeed, King Dollar's crown is already looking pretty tarnished as the buck has been abandoned -- down 6.5% this year, according to Bloomberg data.

Little wonder then that Bradley Kay is fielding so many phone calls about a weak dollar lately. The Morningstar ETF analyst says worried investors want to know about foreign currency funds like the PowerShares DB US Dollar Index Bearish (UDN).

So Kay responded. He created a portfolio for investors with a more bearish opinion on the greenback. The model portfolio he slapped together isn't actually immune to the falling dollar, he says. It's more of a dollar-dulling than a dollar-proofing strategy.

We called Kay this morning to walk us through the portfolio.

For starters, it's important to emphasize that the analyst believes it's imprudent to move entirely out of the dollar and into short protective assets such as commodities and short-term bonds.

Without any real clarity and certainty about an impending collapse in the world's biggest currency, Kay says investors are best served by remaining diversified.

Those qualifications aside, Kay constructed a portfolio that investors could consider if they remained convinced that the dollar is in decline.

The portfolio's biggest allocation, at 28%, is with Vanguard FTSE All World ex-US (VEU), an ETF that tracks an index of 2,200 stocks located in 46 countries.

"It holds an extremely large number of stocks," says Kay. "It's basically everywhere in the world outside of the US. It's about 65% of the global market."

The ETF, which has an expense ratio of 0.25%, includes holdings such as Banco Santander-Chile (SAN) and Telefonica SA (TEF).

Other significant portfolio positions: Vanguard Total Market Index (VTI), an ETF with holdings like Apple (AAPL), IBM (IBM), Johnson & Johnson (JNJ), and Microsoft (MSFT), as well as the Vanguard FTSE All-World ex-US Small Cap ETF (VSS).
< Previous
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos