How To Hedge The Long Term Decline Of The Us Dollar?

[sfokevin]

I will retire to Thailand in two years at the ripe old age of 48. I will have a bit more than $1million. $500K will be locked in a 401K Rollover account and the other $500K in a regular stock fund. Both are under my total control and direction. I also will have my BKK condo completely paid off. I assume I will withdraw and transfer $50K a year to Thailand for life starting at 48 :>

The worry I have is that the value of the US Dollars will steadily decline over the next 30 years relative to other currencies ( I do not subscribe to the gloom & doom scenario of the Dollar collapsing – if that happens the rest of the world will be worse off than the US… and I have land in rural Montana )

I would predict that the dollar to baht rate will erode to a 20 to 1 rate over the next 20 years… My question is what I could invest a portion of my portfolio in to hedge the decline of the dollar?

I presently have the funds in a group of well diversified mutual funds. I was thinking of investing 1/3 of the funds in some investment (preferably one that could be purchased thru my US Fidelity stock account) that is invested in assets outside the US that has a track record stability and return?

Edited March 29, 2006 by sfokevin

[MattFS218]

I have similar concerns about my own (significantly smaller) investment portfolio at the age of 24.

Have you considered the inflation adjusted IBonds offered by the U.S. government. If the dollar declined, inflation would increase or the U.S. would have to input some protectionist measures.

In the immediate term, I'd second guess going short the dollar (the interest yield is enough to prop it up for the short term). I use the Fidelity International Real Estate Fund FIREX....Profunds offers a negative dollar fund that correlates to a falling dollar…but I wouldn’t recommend it for your situation.

--matt

[thai1on]

I will retire to Thailand in two years at the ripe old age of 48. I will have a bit more than $1million. $500K will be locked in a 401K Rollover account and the other $500K in a regular stock fund. Both are under my total control and direction. I also will have my BKK condo completely paid off. I assume I will withdraw and transfer $50K a year to Thailand for life starting at 48 :>

The worry I have is that the value of the US Dollars will steadily decline over the next 30 years relative to other currencies ( I do not subscribe to the gloom & doom scenario of the Dollar collapsing – if that happens the rest of the world will be worse off than the US… and I have land in rural Montana )

I would predict that the dollar to baht rate will erode to a 20 to 1 rate over the next 20 years… My question is what I could invest a portion of my portfolio in to hedge the decline of the dollar?

I presently have the funds in a group of well diversified mutual funds. I was thinking of investing 1/3 of the funds in some investment (preferably one that could be purchased thru my US Fidelity stock account) that is invested in assets outside the US that has a track record stability and return?

I think the dollar will erode a lot faster and sooner than 20 years,but I know only one investment that will keep its value as it has for thousands of years of human history.No matter what happens to the dollar or euro or yen,gold will always be there.

UOB in Singapore sells internationally recognized gold bullion coins and they will be getting a lot of my money as I buy up the coins at their banks and stick them in safety deposit boxes in the same banks.And as the price of gold and silver has really taken off,they turn out to be good investments as well as wealth preservers and safe havens.

[Terminator]

the best way to hedge, is by the use of multi currency sandwiches, whereby you borrow low,lets say $200k in yen @ +/- 2% interest, using $100k as security with the bank and than invest in a basket of currencies. some baskets return in excess of 20-30% after costs tax free.

Jyske Bank in denmark http://www.jbpb.com/default.asp?sLangID=uk has these kind products for private clients, i use them for years.

I will retire to Thailand in two years at the ripe old age of 48. I will have a bit more than $1million. $500K will be locked in a 401K Rollover account and the other $500K in a regular stock fund. Both are under my total control and direction. I also will have my BKK condo completely paid off. I assume I will withdraw and transfer $50K a year to Thailand for life starting at 48 :>

The worry I have is that the value of the US Dollars will steadily decline over the next 30 years relative to other currencies ( I do not subscribe to the gloom & doom scenario of the Dollar collapsing – if that happens the rest of the world will be worse off than the US… and I have land in rural Montana )

I would predict that the dollar to baht rate will erode to a 20 to 1 rate over the next 20 years… My question is what I could invest a portion of my portfolio in to hedge the decline of the dollar?

I presently have the funds in a group of well diversified mutual funds. I was thinking of investing 1/3 of the funds in some investment (preferably one that could be purchased thru my US Fidelity stock account) that is invested in assets outside the US that has a track record stability and return?

[sfokevin]

Real Estate and Gold have too much volitility and I think it too late to jump on either band wagon... I would prefer a stable mutual fund that invests in Asian Mid/Large Companies with stable track record for the long term.

[britmaveric]

20 to 1? Sounds Dooom and Gloom to me mate. Most likely stick to around 40 or above.

[sfokevin]

20 to 1? Sounds Dooom and Gloom to me mate. Most likely stick to around 40 or above.

My assuption is that this will happen over 20 years...

[kdvsn]

20 to 1? Sounds Dooom and Gloom to me mate. Most likely stick to around 40 or above.

My assuption is that this will happen over 20 years...

If deprecation of the dollar is your main concern and you are into stocks, why not diversify into foreign (meaning non-US) stocks? Likewise, if you're looking for income bearing investments, foreign currency denominated bonds can be purchased through certain US brokers and you can buy FDIC insured foreign denominated CD's in the US from an on-line bank called Everbank.

[britmaveric]

20 to 1? Sounds Dooom and Gloom to me mate. Most likely stick to around 40 or above.

My assuption is that this will happen over 20 years...

Yes, but anything can happen in 20yrs - future is unpredictable, could be the direct opposite and be near 60bht to the $.

[sfokevin]

20 to 1? Sounds Dooom and Gloom to me mate. Most likely stick to around 40 or above.

My assuption is that this will happen over 20 years...

If deprecation of the dollar is your main concern and you are into stocks, why not diversify into foreign (meaning non-US) stocks? Likewise, if you're looking for income bearing investments, foreign currency denominated bonds can be purchased through certain US brokers and you can buy FDIC insured foreign denominated CD's in the US from an on-line bank called Everbank.

Yes, I was interested in Mutual Funds that invest in Canadian and Asian (Non-Japan) Stocks - Again these would be long term investments... I have seen the foreign denominated CD these sound interesting as short term hedges - I wonder is they have Thai denominations?

[kdvsn]

Yes, I was interested in Mutual Funds that invest in Canadian and Asian (Non-Japan) Stocks - Again these would be long term investments... I have seen the foreign denominated CD these sound interesting as short term hedges - I wonder is they have Thai denominations?

They do have Thai Baht CDs that pay 3% annual interest with 3 and 6 month terms. Probably inside Thailand you'd get a higher interest rate than that.

[Gary A]

I have more faith in the dollar than the baht. I don't see the baht getting that strong. Years ago I worked in Thailand so I have the advantage of having figured my future needs at the exchange rate of 25 baht to a dollar. Unfortunately I don't have enough confidence in the Thai economy to move any large amount of money over here. My Thai bank account is VERY low now so I have been using my US ATM card for living costs. As soon (IF!) the baht goes back over 40 to a dollar I will make a wire transfer. As of April 7th the ATM fee for foreign currency transactions will go from 1% to 2%. That means a 20,000 baht transaction will cost more than $10. The amount of money you have accumulated even at 20 baht to a dollar will allow you to live out your life in Thailand quite comfortably. If I were in your position I really wouldn't worry about hedging anything.

[sfokevin]

I agree Gary... Other than personal real estate I am not advocating investing in Thailand. I am not one to stuff my mattress or horde gold. - But I do not think the last 20 years exchange rate will continue for the next 20... The future value for the US dollar is in question given the long term imbalance of trade with emerging markets... I think there will be an orderly and slow devaluation of the dollars purchasing power relative to ALL currencies over the long term... I would like to find a prudent place outside of the US to invest a portion (30%) of my assets to diversify the currency risk.

I have suggested Canada and Asia as possible Markets – Does anyone have suggestions of good Mutual Funds/Stocks?.... A few I like are FICDX, FHKCX & FSEAX

[Gary A]

There are a lot of pretty good mutual funds but you are still getting your returns in dollars. Recently I got a severe case of gloom and doom and totally sold out of the stock market. Three funds that I had were TEDIX, VGFCF and PSPFX. They are all global funds with PSPFX being an energy fund. Since then I have three closed end bond funds. PTY, PFN and PHT. They pay monthly dividends and the return is over 9 percent average per year. I think they are pretty safe and you buy them the same as stock. No load is always better.

I agree Gary... Other than personal real estate I am not advocating investing in Thailand. I am not one to stuff my mattress or horde gold. - But I do not think the last 20 years exchange rate will continue for the next 20... The future value for the US dollar is in question given the long term imbalance of trade with emerging markets... I think there will be an orderly and slow devaluation of the dollars purchasing power relative to ALL currencies over the long term... I would like to find a prudent place outside of the US to invest a portion (30%) of my assets to diversify the currency risk.

I have suggested Canada and Asia as possible Markets – Does anyone have suggestions of good Mutual Funds/Stocks?.... A few I like are FICDX, FHKCX & FSEAX

[thohts]

HSBC has a multi-currency account whereby you can by every major currency under the sun.

I think the long-term future of the US dollar is bright. The current account deficit is high (maybe $1 trillion by the end of the year) but as a percentage of GDP it is still very manageable.

And we mustn't forget that the US is becoming a full service-oriented economy, as opposed to other countries that do well exporting goods.

[OldAsiaHand]

There are a lot of pretty good mutual funds but you are still getting your returns in dollars.....

The level of intelligence reflected these posts proporting to give other people advice is absolutely appalling.

Look, a fund that hold Thai equities generates returns that are 100% in Thai baht. It doesn't matter in the slightest what currency is used for accounting purposes, the returns themselves are derived solely from Thai baht exposure, and a fund of SET listed equities would reflect 100% Thai baht exposure, which is what the original poster was asking about.

Jeez.

[Gary A]

It's good to see we have a financial genius on board. The problem is that I didn't see any funds mentioned EXCEPT US funds. I think if you read back you will get a better idea of what was being discussed. HINT! It wasn't Thai securities. Are you still upset because you bought so many Thai Rolex watches?

There are a lot of pretty good mutual funds but you are still getting your returns in dollars.....

The level of intelligence reflected these posts proporting to give other people advice is absolutely appalling.

Look, a fund that hold Thai equities generates returns that are 100% in Thai baht. It doesn't matter in the slightest what currency is used for accounting purposes, the returns themselves are derived solely from Thai baht exposure, and a fund of SET listed equities would reflect 100% Thai baht exposure, which is what the original poster was asking about.

Jeez.

[sfokevin]

I do agree with OldAsiaHand in his general thought... Most of the funds I see have generated good returns - but the return seems to be mostly from the currency fluctuation, If you gauged their performance on their appreciation within their country you seem to find the underlying assets being held are not money making endeavors...

Thai Rolex's!!!!

There are GOLD ones right?....

That is something to consider?....

Edited March 30, 2006 by sfokevin

[mark45y]

Based on my experience of reading this forum for the past two years there is no one on here that is willing to share financial information of any value about Thailand.

The Thai Bhat in twelve months will be at 46 to one dollar.

That is the general consensus of the finical markets and futures trading companies.

This is not news to anyone who has subscriptions to currency trading companies.

I wonder, how on earth did you accumulate one million dollars being so naive to ask for free advice on a internet forum?

Edited March 30, 2006 by mark45y

[stranger_in_the_alps]

Based on my experience of reading this forum for the past two years there is no one on here that is willing to share financial information of any value about Thailand.

The Thai Bhat in twelve months will be at 46 to one dollar.

That is the general consensus of the finical markets and futures trading companies.

This is not news to anyone who has subscriptions to currency trading companies.

I wonder, how on earth did you accumulate one million dollars being so naive to ask for free advice on a internet forum?

Come on. The guy simply is looking for some ideas to diversity his currency risk. He's better than 95% of people who dont understand or care about having all the eggs in one basket. In his cash-rich position, a high risk/high return is not really required. So the key is broad diversification across several asset classes and currencies.

GainCapital.com for some buy/hold currency exposure

International sector ETF's for regional foreign stock holdings

Diversified world bond funds

Commodity-based ETF's (gold, energy etc.)

Real Estate (REIT's foreign and US-based)

I do agree that 20:1 on the baht to dollar is very unlikely in the next 20 years. The US will continue to attract capital as the leading free, liquid marketplace. And if the dollar becomes that devalued, well guess what? There wont be much of a market in the USA for foreign sourced goods, which will naturally re-balance the capital flows and exchange rates. A strong baht? Not in anyone's best interest really. Maybe someday there will be an ASEAN currency similar to the euro, called the "Tiger" or something, but until then, the baht will remain small potatoes. All my humble opinion of course.

[sfokevin]

You are rights mark45y... Some on this forum are not very forthcoming and friendly to share advise and opinions.

[Gary A]

I do agree with OldAsiaHand in his general thought... Most of the funds I see have generated good returns - but the return seems to be mostly from the currency fluctuation, If you gauged their performance on their appreciation within their country you seem to find the underlying assets being held are not money making endeavors...

Thai Rolex's!!!!

There are GOLD ones right?....

That is something to consider?....

You can get a gold COLOR Rolex or a silver colored one. But be careful. I have it on good authority (street vendor) that the Taiwan Rolex is much better than the Thai Rolex.

[ChiefBEM]

You are rights mark45y... Some on this forum are not very forthcoming and friendly to share advise and opinions.

Opinions may differ however those that make a living in the money exchange market are expecting an Exchange rate of 46.75 Thai Baht to 1 USD in the near term.

[OldAsiaHand]

It's good to see we have a financial genius on board. The problem is that I didn't see any funds mentioned EXCEPT US funds. I think if you read back you will get a better idea of what was being discussed.

Surely you are putting us on here. Nobody is that dumb.

Whether the fund is US or Ukranian and whether it accounts in USD or not, any fund that invest in foreign securities of any kind effectively hedges the dollar against a general dollar decline. If you want to hedge specifically against the euro you would select a fund holding euro denominated securities, and if you want to hedge against the baht, of course, you would choose a fund that holds baht denominated securities. That is what the original poster asked about and that is how I answered his question.

Your sneering does nothing to disguish the kind of silly, uneducated response you gave to a perfectly sensible question. It was unfortunately all too typlical of the kind of advice the smug and ignorant constantly foist off on the less sophisticated posters on this forum. Come to think of it, maybe you are that dumb. Your sophomoric sarcasm certainly does nothing to persuade anyone from reaching that conclusion.

[Heng]

I don't think anyone around here would be stupid enough to buy a fake Rolex. Sophomoric indeed.

[Carmine6]

20 to $1 or 60 to $1, same advice. If you really do move $50k per year over, it won't matter what the exchange rate is in 20 years, you'll have a lot of Baht already.

A fall from 38.8 per $ to 20 per $ over 20 years is only 3.2% per year so really your goal is to get a good return no matter what happens to the exchange rate. So with the part of your money that can sit for a long time (the 401k), you make good long term investments whereever they may be. If you get an anuual 10% return in dollars for 20 years but the Baht strengthens a fraction of that per year, who cares? At 10% you'd still tread water against both inflation and the exchange rate. If the Baht doesn't move as you expect, you're even better off.

For the regular account, you've still got over a decade before it's all moved over so a stock fund of Asian equities is a good start for part of it. If the dollar declines, the fund will probably go up and if the dollar strengthens, then even though the fund value might fall, the exchange rate can help that out. Either way, the growth of the underlying equities should hopefully beat inflation. But since you're moving some of that every year and can't always wait out dips, put some in fixed income. That way you can sell those and still move money if you catch a dip in the market. I would still invest a lot of the regular account without regard to your exchange rate projection. Picking stocks or mutual funds is way easier than forecasting currency rates.

[sfokevin]

Thanks Carmine6 - Very good perspective

[Gary A]

I can see you are a sarcastic type of guy with no sense of humor. Fair enough. Up to you. As for myself I enjoy a bit of humor.

Perhaps I didn't explain very well to start with. US global funds obviously deal with global securities thus they pay in global currency. If the foreign currency appreciates againt the dollar obviously you will get more dollars for your return, if any. The point is that you do get dollars from the fund and not foreign currency.

Surely you are putting us on here. Nobody is that dumb.

Whether the fund is US or Ukranian and whether it accounts in USD or not, any fund that invest in foreign securities of any kind effectively hedges the dollar against a general dollar decline. If you want to hedge specifically against the euro you would select a fund holding euro denominated securities, and if you want to hedge against the baht, of course, you would choose a fund that holds baht denominated securities. That is what the original poster asked about and that is how I answered his question.

Your sneering does nothing to disguish the kind of silly, uneducated response you gave to a perfectly sensible question. It was unfortunately all too typlical of the kind of advice the smug and ignorant constantly foist off on the less sophisticated posters on this forum. Come to think of it, maybe you are that dumb. Your sophomoric sarcasm certainly does nothing to persuade anyone from reaching that conclusion.

[sfokevin]

We are all having a friendly conversation...

I hope the Rolex diversion was taken by all as a bit of added humor in the stream of conversation, if not...

PLEASE NOTE: NO ONE WAS ADVOCATING BUYING A ROLEX AS A HEDGE ON THE DOLLAR!!!!

Back to the thread...

As a long term portfolio strategy the dilemma that I see is that you can stay invested totally in the US and get relatively safe, stable and high returns or invest a portion of your assets outside of the US as a hedge invested in stocks that have a lower probability return and more risk. I really agree with Carmine6 when he says picking stocks or mutual funds is way easier than forecasting currency rates.

It still irks me when the baht falls below a certain level I have set into all my long term forecasts. I guess I am just trying to control things too much and that can get me away from the big picture which is to get the best return possible….

[backflip]

"Some on this forum are not very forthcoming and friendly to share advise and opinions"

Unfortunately, many people believe that "equal rights" means "all opinions are equal". There are uneducated, unconsidered, and unsubstantiated opinions. For entertainment value only, this forum has lots of those. On the other hand, there are opinions based on sound economic advice, all too few.

As another poster commented, I find in very difficult to believe that the OP could amass $1 million, and then resort to asking strangers what to do. I don't believe a word of it.