The dollar is falling and it can't get up.

[riskadverse]

Hi - I'm 57 and have been retired for about 1 & 1/2 years.  I spent all my working years accumulating wealth and now I'm getting a little nervous watching the trend reverse.  Specifically I'm worried that investments in the stock market - which already make me nervous - and surely inflation protected bonds - won't be able to offset the erosion of the buying power of the dollar.  Even if the market goes through the roof (and I have the stomach to remain invested), I'm going to be taxed on the capital gains - and combined with the erosion of the dollar, makes me think I'm only going to be treading water.  I'm starting to look at Swiss bank accounts, FOREX and (eek!) gold.

Am I just being "chicken little" or does this bother anybody else?  If I'm not "chicken little", give me some ideas for getting around the problem. 

 

[Nords]

Hi - I'm 57 and have been retired for about 1 & 1/2 years.  I spent all my working years accumulating wealth and now I'm getting a little nervous watching the trend reverse.  Specifically I'm worried that investments in the stock market - which already make me nervous - and surely inflation protected bonds - won't be able to offset the erosion of the buying power of the dollar.  Even if the market goes through the roof (and I have the stomach to remain invested), I'm going to be taxed on the capital gains - and combined with the erosion of the dollar, makes me think I'm only going to be treading water.  I'm starting to look at Swiss bank accounts, FOREX and (eek!) gold.

Am I just being "chicken little" or does this bother anybody else?  If I'm not "chicken little", give me some ideas for getting around the problem. 

Geez, is there a lower bracket than paying cap gains taxes? The more cap gains taxes I pay, the happier I am-- I'm still keeping the vast majority of the profits.

I don't know if you're being Chicken Little, but it worries Buffett too. Although you might be a tad late to the party. He's been shorting the dollar for several years and it might have bottomed out or even moved against him. (We'll know long after he's closed out the trade.)

Currency trading strikes me as a vicious, low-margin profession filled with experts who will cheerfully relieve you of your money. Instead of those high-cost large-spread options, why not invest internationally? Put a portion of your stock portfolio into an international or global fund like Third Avenue (TAVIX), Tweedy, Browne (TBGVX) or the ETF (EFA)? Or put some of your bonds in foreign & emerging markets?

 

[tryan]

I called my Schwab rep with the same concern a couple years ago ... he put me in a Canadian ETF (EWC). It's a little pricey now.

If the crumbling dollar bothered me that much I'ld hedge by shorting in a futures account. Decide how many $$ it's worth for a "piece of mind", set up a futures account, short the dollar and forget about it. If the account is wiped out, you did well other places.

 

[wildcat]

Agree with the Nords the only thing you can do as an investor is react accordingly with some of your slice and dice money. Unhedged foreign funds seem good to me. Brewer's GIM for bonds & some other the other foreign stock funds already mentioned.

 

[cute fuzzy bunny]

I guess the good question is if the tides are moving against the average persons ability to create wealth, and only the smart and well-to-do figure out how to keep their hard earned investment dollars, that propogates the 'rich get richer, poor get poorer, whats a middle class?' direction.

Whats the point at which the poor are really, really poor and the far smaller chunk of rich people start looking like good targets? I read a book some years back, dont recall much from it other than this was the primary thesis...that at some point kidnappings and robberies become a mainstay.