Copyright 2012 by John T. Reed
I currently recommend that you move rainy-day savings account money out of U.S. dollars and into foreign currencies, namely,
Australian dollars
Canadian dollars
Danish krona
New Zealand dollars
Swiss francs
Some readers are trying to get me into endless debates on which is the best. No thanks. I am not interested. That would be the perfect being the enemy of the good. My Succeeding book contains an important chapter titled “First, not the best” which says not to make the mistake of trying to get the absolute best job, employee, spouse, or investment in the world. Set your standards. Set them high, but then pounce on the first one that meets those standards.
I have lost good employees because I did not immediately hire them insisting on looking for a better one. People who wanted to hire me made the same mistake calling me after I had taken another job because they wanted to see if they could get someone better.
Ditto with investment real estate properties I was considering.
I have been married once, for 37 years and counting.
I learned my lesson. You hire, accept, purchase, or marry the first one that meets your high standards. You do not find such an opportunity then endlessly try to improve on it.
The best properties, employees, jobs, spouses are the ones that get taken by someone else the fastest. He who hesitates is lost.
A reader recently sent me an article bad-mouthing the Australian economy, indicating it proved I was wrong recommending the Australian dollar.
First, the Australian dollar is not the Australian economy. My concern is whether the Australian central bank will print zillions more AUDs. Since their debt-to-GDP ratio is the best in the world—21%—among the countries who can still persuade people to buy their bonds, it seems unlikely to me that their central bank will, as our Federal Reserve has recently, start “printing” AUDs.
Our debt-to-GDP ratio is 104% and skyrocketing up further. North Korea’s debt-to-GDP ratio is .4% Obviously, you do not go on debt-to-GDP ratio alone. Check out North Korea’s Transparency International rating and their Heritage Economic Freedom ranking and you will quickly see that debt-to-GDP must me accompanied by other metrics.
Second, I am not interested in readers sending me articles that bad mouth a country whose currency I have recommended. I get ten of them each day from Google Alerts because I have set up Google Alerts on the following key phrases:
Australian dollar trouble
Canadian dollar trouble
New Zealand dollar trouble
Swiss franc trouble
That means I get an email once a day on each of those which contains ten Google search results for those key phrases. You can, and should, do the same on any foreign currency or any other issue worldwide you are concerned about keeping up to date on. Actually, on 5/4/12, my Swiss franc Google Alert did not have ten items. Just four. That is a good sign for those who own Swiss francs.
Also on that date, the three English-speaking currencies alerts were about their currencies falling (slightly) on bad news in the U.S. jobs figures. That points up the trade connections between the four former British colonies. But trade is not the issue. the willingness of the central bank to “print” money is. At present, there is no great pressure on Australia or New Zealand to do that. There is great pressure on the U.S. Federal Reserve to do it. Canada is under some pressure, with an 84% debt-to-GDP ratio, but is reducing their debt-to-GDP ratio unlike the U.S. which is accelerating ours, now at 104%, off a cliff.
The correlation between the jobs report in the U.S. and the dollars of Australia, Canada, and New Zealand points up the desirability of also having some European currencies in the portfolio.
I also have a “iGoogle” web browser start page that tells me the up-to-the-minute amount of the U.S. national debt, the current time and day in Sydney, Auckland, and Switzerland as well as the current values of Australian, Canadian, New Zealand dollars and Swiss francs and the current weather in the various towns around where I live. (In Northern California the weather varies by neighborhood—really—because of mountains, passes, and bodies of water. I have frozen or sweated because I was dressed appropriately for my town of Alamo but not for nearby Walnut Creek or San Ramon or San Francisco.) On my wall is a card with the amounts I paid when I bought my foreign currencies so I can see whether I am ahead or behind. I am not concerned about small movements or very much with individual currencies, only the overall. Typically, I am up a little on one, down a little on another, and even on the other. No worries, mate.
Did the price of Australian iron ore go down and the price of Dutch tulips go up? I don’t care. All I want is adequate. Is a diversified portfolio of AUD, CAD, NZD, and CHF (Swiss francs) less likely to suffer hyperinflation than the U.S. dollar? You betcha. So I’m good. I will leave it to others with too much time on their hands to debate whether Canada relies too heavily on commodity exports compared to Norway and other esoteric nit picking.
Do I continually reevaluate my decision to buy those currencies? Yep. Two years ago I recommended no foreign currencies. I have since concluded that I was wrong.
I learned the continually-reevaluate lesson long ago, too. Just because something was the best or one of the top back when does not necessarily mean it still is. For example, I thought for a while that Lexuses were the best cars. Lately, the Lexus company seems bent on changing my mind about that.
Be decisive, but keep your eye on the situation looking for structural changes that warrant changing your previous decisions. Don’t let the perfect be the emeny of the good—or cause you to suffer analysis paralysis because you cannot stand the thought that the thing you bought might not have been the absolute best available at the time. Analyze a reasonable amount of time then act. Don’t engrave any decision in stone. Change course when new facts warrant.
I am increasing getting the impression that most Americans are suffering from terminal inertia. Looking for excuses not to act. Isn’t there something you can take for that? Other than getting financially wiped out by the financial crisis that gave the most advance warnings of any in history?
John T. Reed