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Old 06-19-2008, 04:03 PM   #61
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...So we are very vulnerable to inflation, especially in the next few years. ....

As you can see, the perfect storm for us would be 1) plummeting US dollar 2) high inflation 3) low market returns. It would seem that something approaching that is occurring.

...
6) extra cash on hand for emergencies
7) overweight portfolio in international, commodities, oil, to help mitigate decline of US dollar
Bosco, since you are vulnerable to inflation I'd think in the fixed income area you would want to have plenty of TIPS when real rates get up to more normal historic levels. Just a thought.
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Old 06-19-2008, 04:25 PM   #62
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Bosco, since you are vulnerable to inflation I'd think in the fixed income area you would want to have plenty of TIPS when real rates get up to more normal historic levels. Just a thought.
I am very leery of US-denominated bonds, since I need to spend the returns in Canada. Given the massive debt and fiscal irresponsibility of the US government, I am unwilling to risk very much of the portfolio on any fixed-income instruments denominated in US dollars. The currency just doesn't seem very stable to me vis-a-vis a resource-based economy like Canada's. In addition, I have significant US-denominated pension income which causes me to be highly exposed to currency risk as it is.

However, Canada has a TIPS equivalent, and I do have some of those in my allocation, as well as international and emerging market bonds.

If there is a flaw in my thinking--I'm all ears.....
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Old 06-19-2008, 05:21 PM   #63
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Bosco, sounds like you have thought this through for your situation. Commodities (natural resources included) have been on a tear recently. But these things generally don't go on forever as there are natural counterforces like recessions for instance. I wouldn't personally bet too heavily against the dollar or overweight commodities. I have had about 1/3 of our equities in international funds for a few years now but am glad that at this time DODFX is hedging the Euro. I just practice moderation myself, no home runs but no strikeouts either.
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