Following up on the original query, I think that one way to hedge against
a falling dollar would be to buy an index fund or exchanged traded fund
that tracks a diversified index of international equities. I like
Vanguard's VDMIX or the EFA exchange traded fund, both of which track the
Europe Australasia Far East (EAFE) Index. The companies in this index are
all successful, large cap names in countries with good legal systems and
accounting standards. If you're pessimistic on the prospects for the U.S.
economy and U.S. companies, these stocks are a nice hedge. Moreover, if
you think the dollar will fall you'll benefit from the exchange rate
difference when their earnings are converted into dollars.

Peter Cooper wrote:

- quote -

Too late, I've channel-checked across her...

-Will

Here in New York Kiyosaki and Trump, and others, are all over the
sidewalk being promoted by The Learning Annex and other
seminar/production companies. My friends have been to a couple, and
they're jam-packed with thousands and thousands of people. The Donald
was always (well, except for when he was in the millionaire's
poorhouse) seen as a real hard-working and saavy businessman (if a bit
of a jerk), while Kiyosaki is just a tent-show act. It amazes me the
Donald would throw in with this guy.

Mrs. Kiyosaki (Kim) also has her own gig now: The Woman's Guide to
Making it Rich (or something like that). Perhaps she'll be on PBS
soon.



On Sun, 5 Nov 2006 08:11:18 -0600, darkness39[at]yahoo.com wrote:
- quote -

Well, I do not fully agree Kiyosaki's view, but I do think there is a
problem. For a long term, nobody, either an individual or a nation,
can sustain by spending more than he makes.

The situation we are creating now is not a win-win deal. On one side,
we have to continue borrowing from other countries heavily (if we don't
change our behavior). On the other hand, other countries like
China/Japan have to continue lending us money (otherwise we are unable
to repay the interest and/or buy their goods). Though I don't think it
will happen, but let's take an extreme case: what if China tomorrow
announce it will stop lend US money and spend its $1,000 billion USD
reserve on buying US assets???? -- again the bottom line is nobody can
sustain long-term by endless borrowing, in which case, both the
borrower and the lender will be hurt.

Many of us, I think, are somewhat blindly believe US will be
regardlessly the most powerful country forever, or at least before we
die. However if history tells anything, it may or may not be the case
- it takes just dozens of years for a country to rise or declien. 300
years ago, China + India's output was about 80% of world's total output
(well, it's from historian, which may be arguable). It took less than
50 years for Holland to become a maritime super-power and then decline.
British Empire only existed for less than 100 years. It took just ~50
years for Japan and Germany to become #2 and #3 from a post-war
rubbish. For US itself, it's not the #1 until the World Wars. The
question is if it only takes US dozens of years to be number 1, why
it's not possible for another country take this glory in another 50
years?

I am not trying to paint a doomy picture, and I still think US is a
great country with prosperity. But we must cut our deficit by behave
responsibly as a nation.


======================================= MODERATOR'S COMMENT:
Posters to this thread should relate comments to financial planning.

Tad Borek wrote:
- quote -

Agree. Kiyosaki is dangerous (and a good marker of the theory that
each boom creates its charlatans).

Trump is of course the king of 'other people's money'.

INteresting trans-atlantic note: my inbox, having flooded with credit
counselling spam, viagra spam etc. is *now* flooded with:

- weight loss spam
- US small stocks/ boiler room spam

Perhaps a sign of the peak of the small cap cycle?

jose.bailen[at]gmail.com wrote:
- quote -

I think you are slightly confusing cause and effect.

The UK and US (and Spain) are running consumer spending booms, backed
by rapid rises in house prices.

If an economy invests (including in houses) more than it saves, it runs
a current account deficit.

The only way for it to finance that is for foreigners to hold more of
their assets in that country's currency: which is achieved by offering
them a higher expected return.

Just to confuse the issue, many of the US' major bondholders (and
trading partners) specifically China, SE Asia and Japan, have a
national strategy of promoting export led growth: in the Chinese case,
by subsidising exports and not allowing the currency to appreciate
against the US dollar.

This exacerbates the effect.

Eventually, those current account deficits will close: there is not an
infinite world demand for US dollars. Whether it does so gently or
violently is open to question (lots of examples of both out there)--
likely it will be achieved either by recession (eg a slump in the
housing market), depreciation of the dollar (or the pound), or a
combination of the above remains to be seen.

- quote -

Just on that, I have a general caution about USD assets as a result
*however* I think US large cap (value tilted) have a relativelly high
exposure to foreign earnings, and are not expensive on other measures.

jose.bailen[at]gmail.com wrote:
- quote -

Partially agree, but I am not sure what you mean by rate of return of
capital, in particular with the countries you mention.
For example, German bonds have a similar return rate to Spanish bonds.
Or did you mean that if one had invested in some Spanish stocks return
would have been better than on German ones?


Wrt US vs. European bonds, sure, US yields are higher, but then again
in 2002 1 EUR was .86 USD, now it's about 1.25.
I am choosing 2002 since it was the date the Euro started to circulate
in Europe

I don't mean that we should buy that "dollar collapse/iranian oil
bourse" conspiracy, and I agree the yahoo! article in the link is
unreliable, but it's probably a good idea to hedge against a small
correction in USD in the medium term.

BreadWithSpam[at]fractious.net wrote:
- quote -

I completely agree. The last people to ask about building wealth are a
guy who inherited a few thousand apartment units in New York City (and
then ran multiple deals into the ground, shafting the bondholders who
financed them), and a fiction author who made most of his verifiable
money from writing books and giving woo-woo seminars about...how to make
money.

Better to talk to real people who did it the boring way, using savings
bonds and CDs and mutual funds, consistently spending less than they
earned. Millionaire-next-door types. "Throw $200 a month into a decent
mutual fund and forget about it" doesn't make for very exciting stories
on Yahoo. Better a rant about how the paper money that seems to work
perfectly well at Starbucks's REALLY HAS NO VALUE!!! Huh?

It will be a happy day when Kiyosaki rides off into the personal-finance
sunset. I can't think of anyone who spouts such consistently bad,
half-baked advice, of the people who actually get air time. Suze is a
regular Ben Graham next to K. It's crazy stuff, the personal-finance
equivalent of Tom Cruise jumping up on Oprah's couch and screaming about
psychiatry.

Whoa! Deja vu...I think I said that before last time Kiyo came up on
MIFP. I need to see a psychiatrist!

-Tad

"anoop" <ghanwani[at]gmail.com> writes:

- quote -

Not keeping your money in cash or money-market funds is a good
start. If inflation kicks in, you want to make sure you are
invested in things which can move with it - or reprice appropriately.
Equity in firms which (a) do business internationally and/or
(b) have price-adjusting power (ie. to charge more dollars
to adjust for inflation) can keep generating inflation-beating
returns far better than money sitting in a money market fund.
There may be rocky paths along the way, and you have to be
careful, but the real losing bet is sitting on dollars in
a savings account rather than investing it.

- quote -

In the long run, maybe not. In the short run, especially if
you have to borrow to buy it (which almost everyone does),
probably. Folks seem to forget sometimes that buying real
estate with huge leverage - is still using leverage - doing
things that nobody'd ever suggest one attempt to do with
other asset classes (ie. borrowing huge to buy stocks).

- quote -

It's Kiyosaki. Unfortunately, I think he's too dangerous
to simply ignore. He needs to be debunked and his dangerous
advice pointed out every time someone brings it up. I saw
him a few days ago on the teevee, along with Trump, talking
about their new book. Both of them going on about how nobody
can ever get rich or save enough by investing in diversified
profesionally managed mutual funds (and tossing in the canard
about 2.5%+ management fees). Then they both go on to tell
everyone to take risks, start their own businesses, yada yada -
all feel-good, rah rah, useless advice. These guys are
dangerous to normal average folks.

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

"anoop" <ghanwani[at]gmail.com> wrote:

- quote -

Unless they save it in a mattress, this isn't so. In general, interest rates
have inflation premiums built in. This isn't 100% true, but generally so.

On the other hand, most working people are net borrowers. A gold standard
penalizes them. Look up the populist movement of ca. 1880 about free coinage of
silver.

As is typical for this author, he mixes up a variety of issues with emotionally
laden rhetoric, careful selection of facts, and a shortage of logic.

-- Doug

The article makes no sense whatsoever. The U.S. economy is getting the
savings of other countries like China or Japan because its economy is
still the one of most efficient -if not the most- in the world, and the
return of capital investment is higher than overseas. A higher rate of
return of capital investment means that the U.S. can offer a better
reward for Chinese or Japanese savings than what they can get at home.
Incidentally, there are other two relatively large economies which run
persistent current account deficits, U.K. and Spain. In the three cases
-U.S., U.K., Spain- the economy grows faster than in other developed
countries. That's why foreign capital gets into these three economies.
On the contrary, countries like Japan, Germany or Switzerland run
relatively large current account surpluses, in all these cases their
economies performed poorly since the 1990s, the rate of return of
capital is very low, and their citizens try to find better investment
opportunities overseas.


anoop wrote:
- quote -


======================================= MODERATOR'S COMMENT:
Posters to this thread are asked to remember that this is a financial planning newsgroup.

joetaxpayer wrote:

- quote -

A solution to "funny money actually punishes working people who
save money." I can't imagine that the solution would be to stop
saving and start spending. So then what are the alternatives?
Real-estate, for example, looks like a bad idea right now.

- quote -

Based on this it looks like it would be safe for me to ignore
the article. :-)

Anoop

anoop wrote:
- quote -

Anoop, a solution to what, exactly? This is not world war two Germany,
no hyperinflation here. This isn't even the early 80's with inflation
that was out of control. I don't downplay the effect of inflation, and
I'd accept the goal of zero to one percent as a target.
Exchange rates fluctuate, true, but an equilibrium is reached and change
is somewhat slow. If we had a 300 yen exchange rate today, a Lexus SUV
would be $15000, instead of $45000. A Camry, $5000. Do we want that?
Every US auto maker would insist on tariffs to stabilize the effect of
such an exchange rate. You want the government involved in every
transaction of goods being imported, more so than today?

I rarely lob personal attacks, no matter what I think of the writer, but
in Kiyosaki's case I make an exception. Many of his posts are dangerous,
suggesting dumping dollars and loading up on gold. No regular poster
here would offer such advice.

The 'answer' is to stay invested in a way that will keep you ahead of
inflation. If you truly believe the dollar is poised to tank, choose
good foreign index/mutual funds. You'll get the advantage of both the
exchange rate as well as stock-based growth.
(you are right, he offers no solution, he's just a fear monger)
JOE

There was an interesting article on Yahoo Finance today
which I'm sure many folks here must have read:
http://finance.yahoo.com/columnist/a...chricher/10932

"While some people do become richer in this system, funny
money actually punishes working people who save money.
It devalues the value of your work and your savings, even
though you may feel wealthier."
..
"For now, though, this funny money game continues. How
long will it last? I don't know. I do know that throughout history,
all paper money has eventually come back to its true value,
which is zero. That's when the game truly ends, and a whole
new cycle of pass the buck begins."

As usual it points out the problem without offering a solution.
Is there a solution to this?

Anoop