How To Profit From The Falling US Dollar
The Dynamic Wealth Report
May 18, 2009
Where To Put Your Money Now That The US Dollar Is Dying!
This weekend I got a call from my uncle. He recently switched jobs and
now runs a small electrician’s office. In the flurry of new paperwork, he
realized his 401K was still sitting at his old employer. He decided to
roll it over to his new employer.
He’s a smart guy. And he’s managed to save quite a bit of money.
We then focused our discussion on where he should invest now. I’m not a
financial planner, but with more than a decade of experience on “Wall
Street”, I know the markets pretty well. So what should he be looking at?
I started thinking about mutual funds, ETFs, stocks, bonds, the list
goes on and on.
Sometimes contemplating all the macro-economic drivers influencing these
investments becomes mind numbing. So I started to break them down one by
one:
Growth in China
The Recession
The Bank Bailout
The Collapse of Housing
Inflation
Deflation
And those are just the biggest ones right now. So which is the most
important? What ideas should we be paying the most attention to? It’s
not just my uncle, it’s everyone.
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Then it hit me.
Reaching into my pocket, I pulled out a brand-new crisp twenty-dollar
bill. And that got me thinking. The US Dollar will probably be one of
the biggest influences over our investments for the next 5 to 10 years. Not many investors focus on the US Dollar but I do… and I know just how
powerful it can be.
What do I mean by that?
I believe the US Dollar is teetering on the cliff of destruction. I’m
going to tell you why. Then I’m going to tell you what happens when the
US Dollar falls.
First, why will the US Dollar fall in value?
That one is simple… with a lot of complex reasons. Let’s just focus on
the most obvious… supply and demand. The demand for US Dollars changes
every day. It’s the world’s reserve currency so it’s used around the
globe for economic transactions of all types.
A few months back, demand for the dollar went through the roof.
Investors were afraid of a global economic collapse. They started
shifting out of other currencies into the US Dollar. Now that an
economic collapse looks unlikely, investors are selling off US Dollars
to buy other currencies.
With demand dropping, so is the value of the US Dollar. But that’s not
all.
Supply is jumping. Before the recession, the Federal Reserve was holding
the money supply relatively stable. Now with the recession in full force,
the government is giving away free money. It seems anyone who can make
their way to Washington and still have a pulse is getting a handout. (Sometimes I think the pulse is optional – anybody can get free money.)
Trillions of dollars are being spent by our government.
Are they taking this money from a savings account? No. Of course not.
Our government doesn’t have a rainy day savings account. They’re simply
printing more money. It’s nice when you have the key to the printing
press!
Remember all the money the US Treasury gave to the banks?
They just wired in a trillion dollars (give or take)… no need to print
anything. No actual money changing hands… just poof. Here’s a trillion
dollars. Don’t get me wrong, it’s real money… but it’s increasing the
number of US Dollars around the globe.
And that means more supply… which also depresses value.
If you follow my logic, you’ll realize the US Dollar is bound to slide in
value. And trust me, it’s a very slippery slope. So aside from the
obvious, selling off the US Dollar, how do we make money?
I can think of a hundred ways… but I don’t have enough room to describe
them all.
So let me give you my best idea… invest abroad.
Take some of your hard earned US Dollars and invest them in foreign
mutual funds or ETFs. Think about it… by purchasing foreign investments,
you in essence convert your US Dollars into a foreign currency. Then you
invest in stocks and bonds denominated in that new currency. Even if the
investments break even, once the US Dollar starts falling, you’ll be
making money.
For example, I happen to like the idea of investing in China. They have
one the fastest growing economies on the planet. Capturing a small part
of that growth will do wonders for your portfolio. One China-focused ETF
I like is the iShares FTSE/Xinhua China 25 Index (FXI). This ETF holds
25 of the largest and most liquid Chinese companies.
Take a quick look. I think you’ll be impressed with the potential it
provides. In addition to the growth exposure to China, it also helps
protect you from the falling value of the US Dollar.
***Editor’s Note: Another great way to profit from the falling dollar is
commodities. Which is exactly why we just launched our new
Commodity ETF
Alert service. It’s a great system for profiting from commodities
without the hassle, expense, and risk of futures trading.
Click here to
read the FREE report we’ve prepared…
• Home Construction Industry (Down 5%)
It’s no surprise the home construction industry has been under
pressure. Just look around… most homes selling right now are
foreclosures or short sales. Nonetheless, they had a great run over the
last two months. Clearly, investors are taking profits off the table now.
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