Dan Repko, financial adviser at AVC Advisory, writes:
The answer to this question lies not in fact, but in perspective.
From an investment adviser's view, AVC Advisory believes the dollar will move sharply lower, possibly to 1.4 to the euro, some time in the next 12 months.
An even bigger move will most likely be against Asian currencies as the yen goes below 95 to the dollar this year.
Most pundits are thinking similarly to us, even if the dollar is undervalued against the euro on a trade-weighted basis by some 15 percent. Take for instance Berkshire Hathaway chairman Warren Buffett, who claimed recently that he expects the U.S. dollar to continue to decline, while claiming he is having a "hard time" finding stocks to buy.
"Unless we have a major change in trade policies, I don't see how the dollar avoids going down," he said. "I don't know when it will happen. I don't have any idea if it's going to be this month, next month or next year."
So from an investment point of view, we would recommend that you sell dollar assets, if possible. For the more daring, borrow in dollars and invest the funds into nondollar assets yielding better rates of interest.
But at this point, after the dollar has fallen so far against the euro in the last two years, an investment adviser may ask his own stupid question: "Why are you still in dollars?"
This is a rhetorical question for an investment adviser, but will elicit a very important response from a financial planner, as their perspectives are quite different.
The investment adviser's point of view is heavily biased toward looking for a good return -- how to wind up with more money. What about risk?
A more holistic view is offered through financial planning. Your liabilities, both current and future, are an important consideration. Accounting principles are based on matching assets to liabilities for a reason!
If you are a U.S. citizen, you may be using money here to pay off debt or bills at home. You may be planning on returning to the United States, and therefore your future liabilities may be entirely dollar-denominated.
As financial planners, we would calculate the amounts and timing of those liabilities and develop a plan to ensure that you have enough dollars to cover them.
If your plans show that you are lucky enough to have large sums in dollars left over, then -- depending on your risk level, time frame and level of desired personal involvement in trading -- you may opt to transfer some dollar assets into euros, rubles, etc.
Most offshore fund managers offer various currency classes for the same fund, so implementation is quite easy and of no real expense if the assets are already properly placed.
AVC Advisory, tel.: 937-8319; www.avcadvisory.com.
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