Smart Investments in the Face of a Weak Dollar

We don't know the specifics of your situation, but we definitely have some ideas for you to consider. If you work with a broker or financial planner, sit down with him/her and talk about these ideas. They'll know they are dealing with someone who is paying attention to what's going on.

Keeping in mind the cautions and concerns about investing overseas that we just talked about - IF (and that's BIG "IF!") you can handle aggressive risk, feel comfortable investing in the U.S. market and off of our home shores and are willing to do some homework -- here are four ways you may be able to boost your profits when the dollar is weak:

1. Consider investing in U.S. companies that have substantial operations overseas that may be able to take advantage of currency differences. Their products or services may be cheaper due to a weaker dollar. That should mean increased sales and higher profits.

BUT...beware of the U.S. stock market. The S&P 500 is up 55% in the past six months...on what good news? Investors world-wide are very worried about putting money at risk and the immediate future of the equity markets world-wide.

2. Look at international stock (large-cap and emerging markets) and bond mutual funds for a portion of your portfolio. Check with Morningstar to see how well those international funds have performed. Limit your selections to funds that have done well for at least the past 5-7 years.

3. Although gold is approaching all-time highs (the all-time high was hit on March 18, 2008 when it almost touched $1034/oz.), consider investing a small percentage (5%-10%) of your portfolio in mutual funds or ETFs that invest in gold and precious metals. Gold is priced in dollars, so people tend to buy it when the dollar is weak because they get more bang for their buck. Increased demand drives the price higher.

When, not if, inflation returns, a small investment in gold will be rewarded.

We believe that gold could hit $2000/oz, in the foreseeable future.

4. Learning more about international CDs and hard currency money market funds that bet against the U.S. dollar. For illustrative purposes only, a couple of places to start are www.money-rates.com/intsavings.htm and the Merk Hard Currency Fund at www.merkfund.com.

In a recent issue of the Wall Street Journal, Merk Investments Currency fund Manager, Axel Merk, said that the U.S. Central bank was promoting a "fairy tale" that it could keep inflation in check while sticking to its current rate target of between 0% and .25%.

We expect the dollar to remain weak for the foreseeable future, and we'll continue to follow it closely.

5. USA TODAY recently stated that seven of the eleven leading indicators in the Economic Outlook Index were positive contributors in September:

• hours worked
• building permits
• real non-defense capital goods orders
• stock prices
• ISM export orders
• the real federal funds rate
• the interest rate yield curve.

Four indicators had a negative effect on the index, including the money supply, crude oil prices, light-vehicle sales and the corporate bond spread.

WE ARE UNCONVINCED that the recession is ending...so...for the time being, if you can't afford to lose any more of your hard-earned bucks...stay on the sidelines with guaranteed investments only such as CDs and Treasuries.

We'll be sure to let you know if there are any important moves that we recommend that you make.

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