How To Protect Yourself Against The Dollars Fall

[Travis]

http://articles.mone...r-disaster.aspx 1. Buy foreign currencies It's complicated for individual investors to purchase currencies outright. One alternative is to invest in foreign-currency mutual funds playing the weaker dollar trend. Three to consider are the Merk Hard Currency Fund, the Merk Asian Currency Fund (MEAFX) and the Merk Absolute Return Currency Fund (MABFX). <P itxtvisited="1">Another option is to go with foreign-currency exchange-traded funds, or ETFs, such as CurrencyShares Euro Trust (FXE, news, msgs), CurrencyShares Australian Dollar Trust (FXA, news, msgs), WisdomTree Dreyfus Brazilian Real (BZF, news, msgs) and WisdomTree Dreyfus Emerging Currency (CEW, news, msgs). Merk advises against exposure to the British pound because he says it faces many of the issues plaguing the dollar. 2. Buy precious metals and other commodities All of these things are priced in dollars. So as the dollar weakens, they look cheaper, and demand goes up. Plus much of the world is in a strong recovery, so demand for these things is stronger. <P itxtvisited="1">Tom Winmill of the Midas Fund (MIDSX) thinks gold, already trading near all-time highs, will keep rising and trade for $1,200 an ounce in the first quarter of 2010. You can get exposure to gold and precious metals through funds like Winmill's or through ETFs or exchange-traded notes such as SPDR Gold Shares (GLD, news, msgs) iShares COMEX Gold Trust (IAU, news, msgs), iShares Silver Trust (SLV, news, msgs) or ELEMENTS Rogers International Commodity Index Total Return ETN (RJI, news, msgs). 3. Buy gold stocks Winmill likes Jaguar Mining (JAG, news, msgs), a Brazilian company that could increase production by 50% a year over the next two years, in part because it's going back into old mines with newer mining technology. <P itxtvisited="1">A classic gold mining play is BHP Billiton (BHP, news, msgs), one of the biggest and more financially disciplined players in the space. 4. Buy companies doing business overseas Companies making their stuff in the U.S. will see demand increase because of a weakening dollar. And companies that produce abroad can buy more greenbacks when they bring their earnings home. This may seem like a mere accounting adjustment. But in fact they're really getting more money for what they sell -- in dollar terms. So it's meaningful. Credit Suisse, for example, just upped its earnings estimates and price target for beer can and packaging producer Crown (CCK, news, msgs) in part because of the weak dollar. About 74% of Crown's sales come from outside the U.S. Some of the other classic plays on this theme are Coca-Cola (KO, news, msgs), PepsiCo (PEP, news, msgs), McDonald's (MCD, news, msgs), Johnson & Johnson (JNJ, news, msgs), Procter & Gamble (PG, news, msgs), Colgate-Palmolive (CL, news, msgs), Caterpillar (CAT, news, msgs), General Electric (GE, news, msgs), Boeing (BA, news, msgs), Intel (INTC, news, msgs) and other U.S.-based manufacturers. (Read "The myth of U.S. industry's demise" for more on this.)<P itxtvisited="1">Be careful if you try to play this theme using mutual funds, however. Some foreign stock funds participate in hedging, a trading strategy designed to negate changes in foreign currency compared with the dollar. A few funds that do this, says Gregg Wolper of Morningstar, are Tweedy, Browne Global Value Fund (TBGVX), Mutual European Fund Z (MEURX) and Pimco International StocksPLUS TR Strategy A (PIPAX). These three fund groups also run international funds that do not hedge. 5. Buy bond funds that park money abroad When you invest in foreign bonds that do not hedge away the currency risk, you're "parking" money abroad. As the local currencies get stronger against a falling dollar, that parked money can buy more dollars, so wealth goes up. Plus the interest rates their money earns abroad will likely be higher than it would earn here. The dollar's shrinking valueAny global bond fund that doesn't hedge away currency risk can be used to play this strategy. Arijit Dutta of Morningstar says three of them are the Pimco Foreign Bond Fund (Unhedged) (PFBDX), the Pimco Global Bond Fund (Unhedged) D (PGBDX) and the Templeton Global Bond Fund A (TPINX).