How best to protect money (fallingdollar)

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Oct 24, 2009 8:45 am

Have a prospect couple, smart people, who have 300k qualified that I know of, plenty of pension and SocSec income, whose primary goal they say is to protect that money over what they see as the deepening economic crisis.
They are entirely in bond funds at the moment. Not need income now.
Their concern is the FALLING DOLLLAR  and they don't want to be paid back in devalued dollars either in their bonds or annuities. They are afraid of stocks, too, but in our intial meeting they did see the inflation protection value of dividend paying stocks.
They were smart people, not crackpots, so I think they will invest if I find the right thing.
One thing which stung me,as an American was when they pointed out to me that European countries have less debt as a function of GDP than the good old non-socialist U.S.
Both of them grew up in Europe.
I was thinking of proposing short and intermediate corporate and global bond funds as a core holding to be able to go longer if interest rates rise (sorry, I can't really do actual bonds). and mixing in a blue chip, dividend paying stock fund like Washington Mutual.
Also thinking about a way to simply add commodities (or has that train left the station?) and a fund based on land.
I say Land because they said their fathers and grandfathers lost all their money twice in the last century because of war and depression in Europe but that the one thing that helped people build fortunes again was land. So I think they would be open to investing in a land REIT, if there is such a thing.
Any thoughts?



Oct 24, 2009 9:27 am

You can use international bond funds but also take a look at Dorsey Wright.  They have two guided ETF programs (you make the trades, they provide the guidance) that rotate among currency ETFs to stay with strong currencies.  Its handy because someday the dollar will rally (take a look at Sep08 - Mar09) and this will rotate with it.

Oct 26, 2009 1:02 pm

Well, to be honest, anyone with 300k and in retirement needs more help than avoiding the 'falling dollar'. 300k is a pittance for a retired couple on a fixed income. Commodity trading makes sense for those with large sums of money and/or high tolerance for risk (neither of which your case seems to present).

 
That being said, steer them toward (if you MUST steer them toward commodities or any 'dollar' protection) companies that rely on commodity prices as a driver in their business.
 
Companies like Freeport-McMoran, Chesapeake Energy, BP, or Catepillar. Freeport and CAT are largely reliant on Copper prices. CAT makes more money when their equipment is demand. Their equipment is in demand when Copper is above 1.80 USD (listen to their February 2009 conference call for clarification). Freeport also benefits from Gold price increases (the traditional metal to hedge inflation against).  Chesapeake and BP have large stakes in Natural Gas prices.
 
The bottom line is that if something is priced in USD (as in Copper, Oil, Natural Gas, etc) then as the dollar falls the price will rise. As that price rises the companies associated with Mining it, Processing it, etc will benefit.
 
You play the falling dollar to your client as in how will that benefit their holdings. NOT to have them buy some random 'dollar hedge'. They aren't George Soros, so they shouldn't try to act like him.
Nov 1, 2009 12:02 am
buyandhold:

Have a prospect couple, smart people, who have 300k qualified that I know of, plenty of pension and SocSec income, whose primary goal they say is to protect that money over what they see as the deepening economic crisis.
They are entirely in bond funds at the moment. Not need income now.
Their concern is the FALLING DOLLLAR  and they don't want to be paid back in devalued dollars either in their bonds or annuities. They are afraid of stocks, too, but in our intial meeting they did see the inflation protection value of dividend paying stocks.
They were smart people, not crackpots, so I think they will invest if I find the right thing.
One thing which stung me,as an American was when they pointed out to me that European countries have less debt as a function of GDP than the good old non-socialist U.S.
Both of them grew up in Europe.
I was thinking of proposing short and intermediate corporate and global bond funds as a core holding to be able to go longer if interest rates rise (sorry, I can't really do actual bonds). and mixing in a blue chip, dividend paying stock fund like Washington Mutual.
Also thinking about a way to simply add commodities (or has that train left the station?) and a fund based on land.
I say Land because they said their fathers and grandfathers lost all their money twice in the last century because of war and depression in Europe but that the one thing that helped people build fortunes again was land. So I think they would be open to investing in a land REIT, if there is such a thing.
Any thoughts?





 
 
Why overthink it?  If the client truly wants to protect from the falling dollar, use the Rydex inverse dollar fund.  Simple.