Friday, November 30, 2007

Falling Dollar: The Ailing Greenback Is Eroding Your Portfolio!

by Sara Nunnally

You Need a Profit Protection Plan!

You’re seeing it in the news nearly every day now…

“Dollar Sinks to Euro”
“Dollar Drops to Record Low against Euro”
“US Economic Gloom Brings New Dollar Lows”

Over the past year, the dollar has been down against 15 of the 16 major trading currencies. And with the greenback hitting fresh lows against the young euro on Black Friday, a national consumer buying frenzy, investors have been forced to watch as their hard-earned portfolio gains lose ground in the global market.

Just how much could you be losing because of a weak dollar? Let me give you an example…

If you had invested in Exxon Mobil (XOM:NYSE) one year ago, you could have made about 16.7%. But consider this: Those gains amount to only 3.5% in euros.

On the global stage, your dollars have lost about 13% over the past year!

And things are beginning to look a lot worse. Some OPEC nations, like Iran and Venezuela are calling for oil to be denominated in a currency other than dollars. Of course, these two countries are far from friendly, but several other Persian Gulf countries are threatening to unpeg their currencies from the dollar because it’s costing them more and more to buy goods from Europe.

That could force the dollar even lower, and you can’t afford to lose any more of your portfolio gains. This quote from Peter Schiff, author of Crash Proof: How to Profit from the Coming Economic Collapse, says it all: “The dollar’s fall is now so pervasive that the world is walking away from it en masse. The story has even been given some sizzle with the announcement from Brazilian supermodel Gisele Bundchen that she will no longer accept modeling contracts in dollars… For investors, the urgency to divest themselves of U.S. dollar denominated assets has never been greater.”

We’re not saying the U.S. is on the brink of economic collapse, but the worrisome drop in the dollar has a direct effect on you, the investor.

The good news is you don’t have to sit back with your fingers crossed, hoping for a comeback in the greenback. You can do something about your slipping profits, and it’s very simple.

Millions of people are following this straightforward Profit Protection Plan to safeguard their portfolios.

Step 1: Diversify

Listen to this complicated quote from Michael Woolfolk, senior currency strategist at the Bank of New York Mellon: “As the dollar declines in value, so does the price of oil in non-dollar terms. Consequently, foreigners bid up the price of oil and other dollar-denominated commodities. The result is that the price of crude oil and other commodities rise in dollar terms as the dollar falls in value against other currencies.”

Boil that down, and you’ve got this simple phrase: “Lower dollar equals higher commodities.” Commodities like gold, oil, silver and palladium… Commodities that are easier than ever to invest in, and more profitable. Take a look.

U.S. dollar index

For the past six months, oil prices have climbed some 40%, and gold and silver prices have climbed 26% and 17.5%, respectively. And though this chart doesn’t show an exact inverted correlation, you can see that in August, when the dollar rallied just a bit, oil prices, along with precious metals, tumbled sharply. But ever since September, we’ve had a falling dollar and rising oil, gold and silver prices.

I think you’ll agree, this chart says it all.

Step 2: Profit

There are a number of different ways to hedge your portfolio with oil, gold and silver. Speculators and hedge funds have made a killing in the futures market, and I’m sure there were folks running out to buy gold bullion or silver coins as soon as prices started running higher.

But there are simpler ways that don’t have as much risk as commodity futures or as much hassle as buying bullion or coins.

Let me show you how easy it’s been for investors to profit from the rise in these commodities.

iShares Silver Trust

This is a chart of three exchange-traded funds (ETFs): the iShares Silver Trust (SLV:AMEX), the StreetTracks Gold Shares (GLD:NYSE) and the U.S. Oil Fund (USO:AMEX).

The unique thing about these three ETFs is that they trade very closely to the price of the underlying commodity. Just look and compare this chart to the commodity futures chart and you’ll see exactly what I’m talking about.

A bare six months ago, if you had invested $500 in each of these three ETFs, you could cash out now with a wad worth $1,974.60 and average profits of nearly 32%!

That’s more than double the loss of the dollar over the past year.

As an investor, you could simply buy these ETFs as a hedge against the falling dollar, and not only recoup some of your global purchasing power, but make a nice chunk of change as well.

These are very easy ways to follow the gains higher in oil, gold and silver, and I would recommend every investor get positioned now, just for their own protection.

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