PowerShares DB US Dollar Index Bearish (UDN)

Obama4Prez said:The U.S. is not in as bad a position as the "pundits" are predicting. Read The Economist.

Sure thing

Compare with this guy who CNBC tries to marginalize anytime they get a chance, such as here.

nevus said:What's the best hedge against a falling dollar considering taxes? It is hard to avoid taxes, but I would look into ETFs of some of the more socialist countries' currencies, like the Canadian dollar.

If you really think the dollar is going to fall that hard, buy all of the food you'll need for the rest of your life now. Nobody is going to tax you when you eat it.

P.S. You're clearly taking some sensationalist propaganda way too seriously.

Every currency is currently in the crapper...for one reason or another..

nevus said:I wouldn't say I think the sky will fall, but I do think there is a small, but very real risk for a "hyper decline in the dollar". I would hate to be heavily invested in something like a gold etf & think I'm insulated from the decline, only to find out I'm only partially insulated. For example, I buy $10,000 in gold. It goes up to $100,000 only because of a reciprocal dollar decline.

1. If you think there is a very real risk of hyperinflation, you probably won't feel comfortable without owning some actual physical gold/silver.

2. Equities (stocks), priced in $US are somewhat of a hedge against hyperinflation of $US. All the capital that one of those companies owns will still be worth something, even if hyperinflation ravages their business.

3. Stocks of companies that produce commodities can also do well in an inflationary environment. Think oil companies and mining companies.

4. One potential way to hedge against inflation is to hoard your cash as pre-1982 copper pennies or nickels (any year). The pennies currently are worth more in melt value than 1 penny. And the nickels are currently worth something like 75% of face value in melt value. Of course, there currently are laws against melting them, but that may change. Even if it doesn't, people will pull them out of circulation if they become worth much more in melt value than face value and eventually will buy and sell them for something much higher than face value. If we don't have inflation, nickels are still worth 5 cents and pennies are worth 1 cent. That's my "outside the box" contribution.

5. Hockey Stick Chart seems appropriate for this thread.

2. Equities (stocks), priced in $US are somewhat of a hedge against hyperinflation of $US. All the capital that one of those companies owns will still be worth something, even if hyperinflation ravages their business.In a mildly high inflation, maybe. In a real hyper inflation, no way.
5. Hockey Stick Chart seems appropriate for this thread.Necessary, not sufficient for inflation. One can even say the hockey stick chart is a result of deflation.

Most if not all currencies will lose value over time.

Best bet is to own good stocks that pay a dividend. This way you own something tangible (part of a profitable company) that will always have value regardless of which currencies are doing well. For example if the Dollar goes into the crapper Pepsi and Coke will still sell soft drinks either in other currencies and/or in inflated dollar prices. Your dividend income and share value will increase over time with a profitable company.

dk240t said:3. Stocks of companies that produce commodities can also do well in an inflationary environment. Think oil companies and mining companies.

Mining companies have historically underperformed their corresponding commodities. Better to buy the gold/etc itself, even after considering the tax consequences.

A few other strategies you can implement if you are absolutely convinced of a future decline in the USDollar:

1. Use leverage. I'm using this strategy myself, borrowing a considerable amount of money at low-interest fixed-for-life rates and holding it as gold. Obvious disadvantage: As with all leveraged investments, if you're wrong, you're really wrong. Also, with credit tightening up, this is becoming more difficult.
(Someone is going to suggest one of the leveraged gold ETFs instead. Remember that these are daytraders' toys and will not work well for long-term investing.)

2. Buy things you want now instead of waiting. As antithetical as this is to the frugal fatwallet mindset, it may be a reasonable choice. I'm not suggesting that you use an impending dollar decline as an excuse to buy a dozen flatscreen TVs, but if you were planning to make any large purchases in the next few years, it may be prudent to consider moving those up a bit.

3. Hold your gold offshore, using a service such as Bullionvault (or even better, a more private arrangement, if your net worth if high enough to justify the additional expense). This is a good tactic if you expect punitively high gold taxes to be enacted, which is entirely possible if the dollar experiences a rapid decline. Of course, at that point, you'll need to decide if your wealth is worth enough to a) renounce your citizenship and live abroad or b) become a tax cheat.

Consider also that pretty much every reasonably prosperous country in the world has strong ties to the US. If the US Dollar goes down, so does everyone else. Things will likely get messy.
(I'll stop there before I wander into TinFoilHatVille and destroy my credibility. )