Wednesday, August 3, 2011

Should You Diversify Away from the Dollar? : GLD, SLV, GLTR, PPLT, PALL, VEU, EEM, CWI, FXB, FXY

Despite its impressive status as the world's reserve currency, it's no secret the U.S. dollar has been on a long steady secular decline. And the forces driving this trend are mostly internal. Loose goose monetary policies coupled with a spendthrift government are direct contributors to the dollar's waning buying power.

How can you defend yourself against a falling US dollar?

Own Physically Backed Assets

One way to protect against a declining dollar is to own assets not correlated or inversely correlated to the dollar. In this regard, investing in metals like gold and silver have enjoyed a new found resurgence in popularity. Investing in gold or silver can be done by purchasing coins, bars or jewelry. The disadvantage of owning physical metal is you need to store and insure it.

Precious metals ETFs are another easy way to invest in metals. Physically backed trusts, like the SPDR Gold Shares (NYSEArca:GLD - News) has over $60 billion in assets and is the largest gold ETF in the world. Its share price reflects one tenth the ounce price of gold bullion, which currently trades around $1,590 per ounce. The iShares Silver Trust (NYSEArca: SLV - News) offers market exposure to silver bullion. SLV has risen 26.87% year-to-date compared to GLD's 13.70% gain.

If you're not sure which specific metal to own, the ETFS Physical PM Basket Shares (NYSEArca: GLTR -News) offers 4-in-1 exposure to gold, silver, platinum (NYSEArca: PPLT - News) and palladium (NYSEArca:PALL - News).

The taxation of precious metals investments is currently treated as a collectible which is a maximum capital gains rate of 28%. These tax rates also apply to gains in both gold and silver ETFs that are backed by the physical asset.

Adding International Exposure

Here's another easy way to diversifying away from the U.S. dollar: Buy and hold foreign ETFs.

Because virtually all international and emerging markets stock and bond ETFs offer unhedged currency exposure, you get more than just equity and bond diversification.

Broadly diversified international ETFs like the Vanguard FTSE All-World ex-US ETF (NYSEArca: VEU - News), iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM - News) and the SPDR MSCI ACWI ex-US ETF (NYSEArca: CWI - News) offer both equity and currency diversification.

Alternative Currencies

Currency ETFs allow you to capitalize on the strength of foreign currencies relative to the U.S. dollar. Whenever a U.S. investor buys a foreign currency ETF like the British Pound (NYSEArca: FXB - News) or Japanese Yen (NYSEArca: FXY - News) they are automatically short the dollar in the corresponding currency. This type of strategy allows you to hedge against weakness in the dollar.

As the intrinsic value of paper currency becomes more doubtful, not all paper currencies will necessarily perform poorly. While overweighting precious metals inside your portfolio like everyone else is most certainly a popular trade, caveat emptor whenever large crowds agree with each other. For that reason, we highlighted in our latest Weekly ETF Pick one particular currency ETF we think is a good paper alternative in a world of diminishing choices. It's ahead by more than 7% since we first featured it and more gains are likely ahead.

Good Market Timing

Now more than ever, it's vital to protect your assets. Over the past few years, we've witnessed the unprecedented destructionof trillions of dollars in capital. And unfortunately, the demolition party isn't yet over.

While most financial professionals will tell you about the important of securities diversification, only the very best will warn you about the growing importance of currency diversification. When is the best time to do this? Before the storm, not during it.

Jay Taylor: Turning Hard Times Into Good Times

Moving Forward to a Modern Gold Standard

click here for audio HOUR #1 HOUR #2

Will the Swiss Central Bank Intervene Again?

As jittery markets pushed the euro below the 1.10 level against the Swiss franc for the first time ever on Tuesday, the headache for the Swiss National Bank (SNB) over its limited options to fight the strong franc is turning into a chronic migraine.

Image Source | Getty Images
Swiss authorities have limited powers to fight a strong Franc

In an interview with CNBC, David Bloom, global head of foreign exchange at HSBC, warned the Bank of Japan before it makes any possible intervention to rein in the yen, by pointing out that there is absolutely nothing the SNB can do against the strength of the Swiss franc, and that the SNB failed at intervention in 2010.

Bloom’s plain advice, “Beware, if you are planning to intervene in the currency markets, it better succeed,” stands as a reminder of the heavy losses the SNB nursed as a result of massive euro buying in 2010.

On Sunday, Nick Hayek Jr., CEO of Switzerland's Swatch, the world’s biggest watchmaker, called for renewed intervention by the SNB to defend exporters’ margins and the tourism industry’s profits. Hayek Jr., speaking to SonntagsZeitung, said the SNB should vigorously defend a level around 1.35 against the euro [EURCHF= 1.0886 0.0044 (+0.41%) ] and should ignore criticism of book losses.

In 2010, the SNB incurred losses of 21 billion francs after intervening in thecurrency markets to keep the Swiss franc from rising. Hayek Jr. states he would rather accept higher inflation than witness damaging repercussions of the strong franc on tourism and exports.

While Neil Mellor, FX strategist at BNY Mellon agreed that “FX intervention is certainly the most obvious means of resolving the SNB’s dilemma …,” he pointed out that “capital controls would be a far more effective option in stymieing the CHF’s rise."

Both options, Mellor pointed out, are fraught with enormous political constraints, and a success isn’t guaranteed. “Either way, the SNB may soon have little choice but to grasp one nettle or other should the market continue to make use of the CHF as a haven from risk.”

Since the beginning of the year, the Swiss franc [CHF=X 0.7669 0.0026 (+0.34%) ] has risen by more than 16 percent against the dollar and by almost 12 percent against the euro. Second- quarter corporate results in Switzerland have revealed the extent of the damage the Swiss franc has done to companies’ bottom line.

UBS [UBS 15.71 -0.76 (-4.61%) ], Credit Suisse [CS 34.01 -1.54 (-4.33%) ], Swatch and Lonza are just a few of the companies that have felt the pinch from the relentless rise of the franc, which is eating into profits as most of the companies’ revenues are generated outside of Switzerland, but their cost bases are predominantly in Switzerland.

The Swiss economy has been surprisingly resilient to the strength of the Swiss franc, however. The latest PMI data for July was unexpectedly steady and even pointed to a rise in manufacturing activity, despite the rise of the franc. However, the Swiss government recently lowered its growth forecast, stating that further appreciation of the franc will threaten economic growth “to a serious degree." Export data for June showed that exports to the EU fell almost 15 percent year on year.

10 Ways to Protect Your Hard Earned Money

The 10 Commandments for Consumers

Consumers should follow a few basic rules to protect their money…Let’s review 10 of them. Words: 619

So says Jeffrey Strain ( in edited excerpts from an article* which Lorimer Wilson, editor of (It’s all about Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Strain goes on to say:

10. Read the fine print

When it comes to contracts, it isn’t the large print you need to worry about. Potential surprises are usually obscured in the fine print. That’s why you should always read every word before signing. If you’re caught off guard by an unexpected charge, “I didn’t know” won’t get you off the hook if the charge is noted in the fine print.

9. Don’t give financial information to strangers

It doesn’t matter if a request for personal information comes by phone, e-mail or another method: if you didn’t initiate the contact and you aren’t confident in the legitimacy of the company or person, don’t share information such as Social Security or bank account numbers.

8. Don’t sign anything you don’t understand

If you don’t understand a contract’s terms, study up before you sign. If the contract’s language is over your head, hire a lawyer who’s knowledgeable about the subject and make sure you’re getting exactly what you want.

7. Get promises in writing

A salesman trying to sell a product might make offers that aren’t spelled out in the contract. Instead of taking his word, ask him to put the pledge in writing. A verbal agreement is useless if it’s not backed up in writing.

6. If it seems too good to be true, it probably is

Approach every unusually good offer with skepticism. Research the merchant and find out if other customers had positive experiences before you buy. It will save you a lot of money, stress and regret later.

5. Do not use easy passwords

As consumers make more electronic transactions, they must work harder to protect their accounts. While you might want your passwords and pin numbers to be easy to remember, don’t make them simple for thieves to figure out. Stay away from birthdays or common words, and change them regularly.

4. Shred all documents

There are lots of ways for people to access your financial information, especially when you leave it on the street in your trash. Not shredding your bills and statements makes it easy for thieves to get the information they want. If you don’t have a shredder, buy one.

3. Protect your computer

If you keep financial information on your computer or use it to make transactions, protect yourself with firewall and antivirus software. Consider adding spyware and adware, which prevents outsiders from accessing your computer without your knowledge.

2. Question advertising

When you see “sale” signs in a store, remind yourself that these words are used liberally and the offers might not be bargains. To find out if you’re getting a deal, look at the product’s regular price and find out what similar items cost elsewhere. Advertising almost always makes prices seem better than they are.

1. Request a copy of the Consumer Action Handbook

The Federal Trade Commission provides this book for free. It offers information about managing your credit and filing complaints, and tips to help you prevent identity theft.

Marc Faber: 'The Bear Market is Starting'

  • The bear market is on its way back, economist and contrarian investor Marc Faber, the editor and publisher of The Gloom Boom & Doom Report told CNBC Tuesday. "The bear market is starting. When you compare equities to bonds and cash I don't think equities are very positive," Faber said in an interview.
  • "The Treasury market is telling you that the economy is in recession," said Faber. "So if the bond market is telling you that the economies of the Western world are weakening, but at the same time the stock market is still relatively high, I think the stock market is vulnerable."
  • He added his voice to those criticizing politicians in the US and elsewhere over the current problems. "The politicians are all useless individuals. Nobody is reducing the problems in the US or Europe, just putting on a band aid and postponing the problems endlessly," he said. "Some analysts think that there's a chance economic data will surprise on the upside but I think, if anything, it will be on the downside," Faber added. He believes that some companies will start to disappoint in the second half of this year.
  • Faber argues that China disappointing "is a much bigger risk for the global economy than the US because the US is no longer a major commodities buyer". He believes that the impact of a decline in Chinese growth on the oil price could be critical for major commodities producers like Canada, Australia and the Middle East. "If commodity prices are falling, then commodity producers will buy fewer goods from China," he pointed out. "This is something that the world central bankers can't deal with."
  • Food price inflation is more of a problem in emerging markets than in the developed world as food is typically a much bigger part of annual spend in poorer countries, Faber pointed out, arguing that this could lead to worse than expected growth in China. Faber, who describes himself as "ultra-bearish", said that he thinks that precious metals are the best place to be at the moment.
  • Despite worries about major euro zone economies including Italy, he is relatively bullish on the survival of the euro. "What surprises me more is actually the strength of the euro and that it has not collapsed yet," he said He believes that peripheral economies which drag down the euro will eventually be "chucked out" of the single currency. "I would have chucked out Greece three years ago, straight away, and it would have been much cheaper," Faber said.
  • Gold's position as a safe haven will continue to keep prices close to their recent historical highs, Faber believes. He said that he would buy gold if it falls below $1500 per ounce again.

Buy GBG $2.12 -- Head & Shoulders SP-500 and HUI

I decided to take what I hope will be a low risk mining position with this purchase of Great Basin Gold (GBG) at $2.12. Honestly, I am not holding my breath on how long this rally in miners will last, but I presume the stock market will bounce soon and that may help, however briefly.
Click on any chart to ENLARGE
This chart of the SP-500 was made before the end of today's trading session.....and price continued to fall right through the neck line of the head and shoulders pattern. If this pattern continues to play out, price projects to a continued minimum price decline 110 points or the 1150 area.
This chart of the Amex Gold Bugs Index (HUI) shows the nearly perfect symmetry of a head and shoulders pattern. If price should continue to rally this week and surpass 587, the symmetry would be perfect.

Lindsey Williams Middle East Crisis 3 DVD Set The Middle East The Rest of The Story

Middle East: The Rest of the Story - The Entire Three DVD Set - by Lindsey Williams. This is the actual three DVD set that was shipped in March 2011. This video contains the entire three DVD set together and is about two and a half hours long. The Topics include: The Middle East Crisis. Future Price of Crude Oil. Future Price of Gasoline and Diesel. Future Grocery Prices. Explosive Growth to US Crude production. Elite Plans through 2012. China and the US. The Future of Islam. Riots in the Middle East. And Other Information never told before. These are the DVDs promoted on radio shows that Lindsey Williams appeared on such as the Alex Jones Show.

Gerald Celente : The Government are losers on everything they touch

Gerald Celente : whether they downgraded or not officially it is downgrading itself , just look for instance what happened to Gold prices since this charade begun to take place Gold has gone up over a 120 dollars an ounce , the whole world knows what's going on I heard your prime minister Putin saying that the United States is acting like a bunch of parasites and that's what this is when it comes to the dollar "
"The devaluation of the dollar ha s been going on for a long time but they are not calling it a devaluation what they are doing is they are flooding the world markets with cheap dollars just as the Europeans are doing with the cheap Euros so the more the product is out there the less valuable it is , so it is a De Facto devaluation but in real terms again when you see gold prices sky rocketing that what it means the dollar is not worth the digital paper it is not printed on "

US Food Stamp Participation Rate Hits Record