how to react to the sinking US-dollar

[GeKoSc]

Most expatriates in Thailand and elsewhere are depending highly on the fluctuations of the USD versus BHT or other local currencies. 

I thought to purchase an bearish USD ETF to counteract the sinking US-dollar...but what would happen with this ETF if for any reason the US currency will be replaced by a new one (this matter is still in discussion since several years) ?

Which other options are suitable to react to that problem? Your ideas are welcome...

 

[mstevens]

I am yet to retire but if I was retired and my currency crashed I thought I would have one day a week (or two, if things got really bad) where I did almost nothing and had a very cheap day, where I did things such as read a book, watch some TV or go for a long walk....things that are free.  If you limit yourself to what you do on one day of the week to free activities and either don't eat out or eat on the street / in food courts, the other 6 days you might be able to live as if your currency was still however many percentage points stronger.  It seems to me that having a quiet / cheap day and living the other 6 days as you had would be better than reducing your standard of living / the things you do every day of the week.

[jerry921]

The best answer, of course, is to have room in your budget to absorb unexpected expenses and currency fluctuations.

I looked up a 10-year chart for the $/Baht and the strongest the Baht got was 28.66 on 20 April 2013. The weakest was 36.44 in Oct '15. Because of the resolution of the chart those might not be the exact min/max but if you're planning, and have room in your budget for a 26 baht per dollar exchange rate, you'll probably be fine in the next 10 years too (I just picked a number at random that was a bit worse than the worst case in the last 10 years).

 

At some point, the strength of the Baht becomes a problem for Thailand's economy, which is dependent upon exports for 70% of GDP. When that happens the economy will begin to do worse and the problem self-corrects somewhat. So while THB/USD has been all downhill since 2017, it's probably closer to the bottom than the top at this point, and making moves planning for (additional) depreciation might be the right move at precisely the wrong time.

 

That said, one thing I've done to mitigate dollar weakness (I'm a US person retired in another country - not Thailand - but dollar weakness is the same problem) is to invest in oil stocks. Because of the petrodollar (most oil trading prices are set in US dollars), oil prices tend to go up when the dollar gets weak, and oil stocks go up with the price of oil, so if my cost of living is getting greater due to dollar weakness, at least I'm making a little more money on my oil investments. Or vice versa. That's my theory anyway. I've got a diversified portfolio, but I'm overweight oil for that reason (and because it's a hedge against US inflation).

 

I don't know that right now is the time to be buying oil stocks. I'm not recommending that anyone buy anything right now, just that when the time is right to buy, that might be something to own that mitigates dollar weakness a bit. For example if we have a nice stock crash and the prices become suddenly a lot lower, I might use some of my investable cash to add to my oil stock position.

[GeKoSc]

45 minutes ago, jerry921 said:

The best answer, of course, is to have room in your budget to absorb unexpected expenses and currency fluctuations.

I looked up a 10-year chart for the $/Baht and the strongest the Baht got was 28.66 on 20 April 2013. The weakest was 36.44 in Oct '15. Because of the resolution of the chart those might not be the exact min/max but if you're planning, and have room in your budget for a 26 baht per dollar exchange rate, you'll probably be fine in the next 10 years too (I just picked a number at random that was a bit worse than the worst case in the last 10 years).

 

At some point, the strength of the Baht becomes a problem for Thailand's economy, which is dependent upon exports for 70% of GDP. When that happens the economy will begin to do worse and the problem self-corrects somewhat. So while THB/USD has been all downhill since 2017, it's probably closer to the bottom than the top at this point, and making moves planning for (additional) depreciation might be the right move at precisely the wrong time.

 

That said, one thing I've done to mitigate dollar weakness (I'm a US person retired in another country - not Thailand - but dollar weakness is the same problem) is to invest in oil stocks. Because of the petrodollar (most oil trading prices are set in US dollars), oil prices tend to go up when the dollar gets weak, and oil stocks go up with the price of oil, so if my cost of living is getting greater due to dollar weakness, at least I'm making a little more money on my oil investments. Or vice versa. That's my theory anyway. I've got a diversified portfolio, but I'm overweight oil for that reason (and because it's a hedge against US inflation).

 

I don't know that right now is the time to be buying oil stocks. I'm not recommending that anyone buy anything right now, just that when the time is right to buy, that might be something to own that mitigates dollar weakness a bit. For example if we have a nice stock crash and the prices become suddenly a lot lower, I might use some of my investable cash to add to my oil stock position.

Interesting, you use oil shares I do the same with gold shares; both are USD sensitive... the gold price is manipulated by the central banks while oil share prices are less manipulated...all financial experts agree that there will be a stock market crash within the next 2 years, which will be much more pronounced than those in 2008 and not only will sink the stock prices but also endanger world (reserve) currencies. At the same time some experts assume that the US dollar will be exchanged for a new world currency by the IWF. If this will really occur the dollar could loose as much as 50% in addition of the mentioned share price drop...you can not sit that out....do you? 

[jerry921]

6 hours ago, GeKoSc said:

Interesting, you use oil shares I do the same with gold shares

Right, oil is black gold, only constantly consumed. You need energy to manufacture everything. Oil stocks pay nice dividends. I like companies with lots of oil in the ground, it's a future source of value, but doesn't cost them any storage costs until they pump it out.

 

6 hours ago, GeKoSc said:

all financial experts agree that there will be a stock market crash within the next 2 years

When all financial experts agree on something the odds of it not happening approach 100%.

 

We could have a crash, or we could have a brutal grinding bear market that erases a lot of value over a longer period of time than a crash, or the central bank manipulations could perhaps somehow manage to avert either of these.

 

6 hours ago, GeKoSc said:

At the same time some experts assume that the US dollar will be exchanged for a new world currency by the IWF. If this will really occur the dollar could loose as much as 50% in addition of the mentioned share price drop...you can not sit that out....do you? 

Some experts? US dollar won't go away as fast as those doomsayers predict - disaster always takes longer to play out than anyone expects, not least because there are always a lot of people trying to avert it. The more inevitable it is the longer it takes, because there is more general agreement on the need to try to avert it, and early preventative action becomes more likely.