Out of Dollar, Into Yuan
Posted by Frugal on October 24th, 2007
One of the most famous and vocal bulls in commodity, Jim Rogers, is moving ALL of his assets out of the dollar, and buying Chinese yuan. Smart move I would say, in the long term.
According to his opinion, yuan will probably triple or quadruple its value in the coming years, and I also have no doubt about that. It is becoming increasingly apparent that there is simply no “strong dollar” policy anymore. Further, it’s only a matter of time, before US government will use taxpayer’s money to bail out all the irresponsible homebuyers and speculators. The MLEC that is being discussed for rescuing SIV is simply another Wallstreet scam of shifting/delaying losses off-balance. I don’t know how it can be even legal, when we just had Enron that hid huge losses off balance sheet. Why is there no one talking about this comparison? You can make everything “legal” on paper, but the hard cold fact remains that this process is simply moving the losses around different entities.
At this point in time, I’m under the most stress in my financial decisions, and I’m sure it was a painful decision for Jim Rogers too. US dollar seems to be very over-sold. Yet next week US Federal Reserve is going to cut interest rate again most likely to bail out the big financial companies. The stock market is deteriorating and getting overbought as we speak. Precious metal stocks will likely suffer another round of collateral damage if stock markets fall. It is very difficult for me to go either way, selling out precious metal stocks or selling out the oversold $US. I’m staying put for the moment, and picking up a little of other currency that have not appreciated so much against $US. Certainly, if I have the mean to buy into Yuan, I will make that high in my list of choices.
I don’t know how bad $US might fall versus the old Roman empire currency. But the fact that we are in the information/internet age, it is most likely that the fall will be much more precipitous when it happens. You can take the example of ABX mortgage index. It takes only several months for “good money” to go completely BAD. I can imagine that there may be foreign capital control (no money going out of US) when that happens.
I’m preparing myself to load up some more physical bullions if precious metals pull back. I will probably buy Canadian maple gold/silver coins. No more US coins for me.
More related posts:
Digg it Del.icio.us Reddit Furl BlinkList Newsvine Yahoo MyWeb
October 24th, 2007 at 6:19 am
In your opinion, what would be the best way to invest in foreign currency, say yuan, from a retirement account?
October 24th, 2007 at 7:11 am
Jim, check out my blog on currency ETF’s.
http://lcmarket.blogspot.com/2007/10/usd-taking-it-on-chin-today.html
There isn’t an ETF for yuan yet but Rogers is also buying yen and there’s one for that.
October 24th, 2007 at 9:03 am
Frugal,
Sorry I don’t have to source to cite. Read in the last 7 days that of all the US physical dollars in circulation, a full 20% of the value is “backed” by gold held by the US government. In contrast, the Canadian government does not hold much gold at all. I think it would be a useful exercise for all of us to get some figures of the top 5 or 10 gold holding governments.
October 24th, 2007 at 10:36 am
doesn’t that assume that China will stop purposefully devaluating their currency?
October 25th, 2007 at 2:34 pm
Great Post. I am totally looking for non US based investments at the moment. US currency is becoming more and more unstable especially with all of the additional dollars created by the Federal borrowing. I’ve bought some Silver ETFs and silver coins to preserve some value. I think your idea to diversify into Chinese currency is a good bet. Sooner or later US $ is going to collapse since banksters are printing money like toilet paper.
As far as the housing loan crisis, that was the biggest farce there is. Tons of money was made, then all the debt was repackaged and resold back to consumers into their 401k. I was shocked to find that out of the three 401k accounts I have (two from previous employers) all switched from government bond funds to Ginie Maes. Go figure
, but now they want government to bail out the banks? Funny.