Customer Service 1 (888) 261-2693
Please enter Search keyword. Advanced Search
Steve's note: One of the biggest concerns investors have today is the long-term health of the U.S. dollar. Where can a saver turn if he simply wants to park cash in an interest-bearing CD? In this weekend's essay, my friend David Galland offers some answers...

The Best Currencies for Diversifying Your Savings

By David Galland
Saturday, October 3, 2009

Last month, I faced a difficult question: "What are the best foreign currencies we can park cash in?"

At Casey Research, we strongly believe no foreign currency is worth much more than the intrinsic value of the paper it's printed on.

Most governments have followed the lead of the U.S. when it abandoned the gold standard. All of these governments like the flexibility of being able to print money freely and use inflation as a hidden tax on their citizens.

Even conservative Switzerland has progressively uncoupled its currency from the gold that used to back it up (up until 2000, the Swiss central bank had a legal requirement to hold gold reserves equal to 40% of its currency).

That said, in a world where one needs to have access to cash quickly, it makes sense to park one's cash in a basket of currencies as opposed to having it all in U.S. dollars.

While one may speculate on specific currencies, it is very important to remember that short-term volatility is all but impossible to predict.

In the short run, exchange rates are more likely to be affected by government policies than by fundamentals. To anticipate these is a fool's game we would not want to play. And in the long term, the only form of money we want to hold is gold (and silver).

Our recommendation for those who want to diversify their cash holdings is to park a higher percentage of their cash in currencies that have stronger fundamentals than the U.S. dollar, the British pound, or the euro.

We generally like the Canadian dollar and the Australian dollar, as both countries have had relatively more conservative monetary policies than the U.S., the EU, or the UK.

In addition, their economies are strongly dependent on natural resources, which we see as the best hedge against inflation. Canada, for instance, is the United States' largest foreign oil supplier. Australia is full of gold, copper, uranium, and natural gas... all of it easily transportable to China. Over the coming years, these "commodity currencies" will hold up much better than the dollar. So consider these when looking for a dollar alternative.

Another choice would be the Swiss franc, as that country is still conservative and still apparently committed to hold 20% of the value of its paper currency in gold. Over the past three decades, the Swiss franc has held more of its value than most other major currencies in the world; no future guarantees, but a good track record.

Another prudent strategy could be to hedge against short-term volatility and to build a portfolio of currencies that would spread across all major denominations.

The million-dollar question is "Where can I park my cash?" The answer is, "Park it in several different places."

Make sure to keep a good portion of your savings in gold and silver. How much you hold really depends on who you are and what your tolerance for risk is. At this point, almost everybody should have 15% of their money in gold, up to as much as 30%. Importantly, don't chase the price. Inflation won't make itself known for some time, but there will be a lot of volatility in the financial markets, periodically pushing gold back. So, buy on the dips. But buy.

And consider getting diversified into the currencies listed above.

Those are the strategies we recommend. For tactics, Casey Research has found an easy way to park our money in a broad basket of foreign currencies – while retaining maximum flexibility and minimizing transaction costs – is to open World Currency Deposit Accounts or CDs such as those offered by our friends at EverBank.* It's the easiest, most hassle-free way to take the steps I've just outlined.


David Galland

* David Galland was a founder and former partner of EverBank and still owns an inconsequential amount of stock in the company.

Market Notes


The big money returns... to sell
Remember that "big money" volume we were waiting to see enter the market? Well, it finally showed up. But it showed up with a fistful of sell orders.

The stock market needs the "fuel" of buying from large mutual funds, hedge funds, and pension funds to stay healthy. For the past few months, we noted the lack of participation from these buyers.

At the bottom of our chart of the benchmark S&P 500 fund (SPY), you'll notice a series of black and red bars. Black bars represent trading volume on days the market advanced. Red bars represent days the market declined. The taller the bar, the greater the volume.

As you can see, volume gradually dried up during the summer rally. But in the past week's selloff, volume has boomed. The big money has returned... and it's selling right now.

– Brian Hunt

In The Daily Crux

Recent Articles

  • House Prices to Soar AFTER the Fed Raises Rates
    By Dr. Steve Sjuggerud
    Friday, August 29, 2014

    Yes, the Federal Reserve should raise interest rates next year. But no, that does not mean that the housing market is doomed.
    In fact, the opposite is true, based on history...

  • What the 9th Inning of This Bull Market Will Look Like
    By Dr. Steve Sjuggerud
    Thursday, August 28, 2014

    This was the first time I'd experienced "The Ninth Inning" of a major stock market boom. I sure got the full experience...

  • Why Stocks Should Run Higher From Here
    By Brett Eversole
    Wednesday, August 27, 2014

    Right now, a stock market extreme is pointing to higher stock prices from here...

  • When It's Okay NOT to Listen
    By Dr. Steve Sjuggerud
    Tuesday, August 26, 2014

    How can you be at the top of your game if you don't even know what the top of your game looks like right now? If you don't even know what your peers are doing?

  • "Non-Reportable" Gold
    By Dr. Steve Sjuggerud
    Monday, August 25, 2014

    "If I hold gold at a bank in Switzerland, is that reportable to the IRS?" That little question sure kicked open a can of worms...