Massive US Dollar Sell-Off On The Way: What To Do?
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Magna
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It may or may not, and those things can be endlessly debated, but frankly that's not the issue. Aside from the technicals on the dollar looking horribly weak, the fundamental underpinnings on the dollar are in very bad shape (both currently and going forward). Coupled with that many central banks from other countries are weaning themselves off the dollar as their reserve currency (either by freezing further purchases of dollars or actively selling/converting their dollars to other currencies, etc). Will the dollar "collapse"? Probably not, for if it's going to go down it's in everybodys best interests for a steady, measured decline. But will the dollar continue its downward march? Looking at technicals and fundamentals, most likely. So the only question for traders (and investors) is what you can do about it to lessen the impact on the dollars you hold that are continually losing purchasing power.
drsteph,
what´s the advantage of TIPS? ticker IRRAX i assume
it yields only 3,84%
moneymarket yields around 5%
1year cd 4,79
thanks
what´s the advantage of TIPS? ticker IRRAX i assume
it yields only 3,84%
moneymarket yields around 5%
1year cd 4,79
thanks
I can't say it any better, or even nearly as good, under any circumstances. So I won't try.
Thanks, Magna.
markets and popularity goes hand in hand - and right now there are not many people that would say they love America...
It seems however that you overstate how much people care about US. I believe that the <u>slow</u> demise of US (e.g. as measured by % of world GDP, dollar value, power of diplomacy etc.) will be demonstrated in how little people give a shit about America...unless Americans have some great president/actor again that fixes it - like Arnold
What do you mean by saying it's losing its purchasing power?
Real estate prices go down now, electronics go down and most other prces just don't rise
$ gets more purchasing power now.
Euro growth was pure speculation in November December
Ben is not going to cut rates. Markets slowly start to understand that and with it $ will start raising into the year, I guess we will have 1.25 before the summer
This is my understanding. It may be incomplete. Do your own DD.
For TIPS, your principal is guaranteed. In other words, you deposit $100K with the government, you will at least get back the 100K. In the meantime, you will be paid a coupon based upon the rate of inflation based on CPI. CPI goes up, you get paid more. CPI goes down, you get paid less. CPI goes to zero, you get paid nada.
In a high inflation environment, CPI>8%, you make premium which you can then reinvest in TIPS & compound (if you are using a fund, which you probably are). TIPS will prevent hemorrhage, as even if real inflation exceeds CPI, as the equity markets would probably bomb in that setting.
In a low to moderate inflation environment, such as what we are in, TIPS behave mediocrely (3.8% vs 5% money market) and you probably wish you were in another asset class as equities rise.
In a deflationary collapse, as equities bomb out, you lose your premium but at least get your money back on the principal. So, at least in that scenario, you are protected from loss of principal.
I wouldn't bet the farm on these, but its probably worth a partial allocation in your retirement portfolio to hedge against those three sigma events. Aside from that, it is probably inherently confiscatory, as CPI is routinely understated.
I hold a TIPS fund and routinely question my intelligence for doing so. But it helps me sleep better doing so, so I'll give up 1.5% over cash for that option.