How can I turn a buck on the dollar's woes?

September 20, 2007 12:25 PM

Can your average person who spends their entire workday in front of a computer short the dollar online, through some sort of investing site? I'm macroeconomically literate, but know next to nothing about what sort of options are available for playing with my money. I read about day-trading Japanese moms making money on the currency trade, and I'd like to keep my relatively meager savings from vanishing into some Weimarish wheelbarrow-of-bills traffic jam, so...do I need to learn Japanese to do it?
posted by paul_smatatoes to work & money (17 comments total)

Interactive Brokers
posted by jclovebrew at 12:30 PM on September 20, 2007

Everbank offers certificates of deposit in a variety of foreign currencies. But it can be as easy to lose money as to make it, as many Japanese housewives have learned.
posted by procrastination at 12:43 PM on September 20, 2007 [1 favorite]

I'd like to keep my relatively meager savings from vanishing into some Weimarish wheelbarrow-of-bills traffic jam...

If this is really your concern, it ranks up there with insuring your house against nuclear war. The probability of this scenario happening and of both you being in a position to collect (you'd need a wheelbarrow, for one thing, and a solvent bank within wheelbarrow distance to have the money wired to) and there being a viable entity to collect "your" non-dollar money from is extremely small.

If you just want to reduce your exposure to dollars, buy foreign stocks or stocks of companies that do a lot of business overseas (which is most of them).

If you want to hedge against the total breakdown of society, Andrew Tobias has recommended a stash of silver dimes, since it's a well-understood unit of precious metal that is small in size and value to be useful in a postapocalyptic world.
posted by backupjesus at 12:51 PM on September 20, 2007

Due in part to the massive leverage involved, currency trading is an extremely risky and speculative activity. A good friend of mine tells the story of how it took him 16 months to lose his initial investment in currency speculation. He was quite proud of this fact, pointing out that most everyone else he knew who got into the game lost their money much faster than he did.
posted by Lame_username at 12:51 PM on September 20, 2007

You can buy FXE. It's a grantor trust that reflects the value of the euro...it's a kind of ETF. I'm sure there are similar products for most of the major currencies but don't know them off the top of my head.
posted by cyclopz at 12:53 PM on September 20, 2007

I meant to add..."using dollars to buy euros is effectively shorting the dollar."
posted by cyclopz at 12:55 PM on September 20, 2007

If you are willing to pay the fees, there's currency ETFs - like ticker UDN, which is short the dollar against a basket of other currencies.
posted by milkrate at 1:02 PM on September 20, 2007

and Powershares' DBV ETF.
posted by ikkyu2 at 1:05 PM on September 20, 2007

https://fxtrade.oanda.com/ is an fx trading site that caters to individuals and has features like interest payments and margin lending.
posted by kickback at 1:13 PM on September 20, 2007

just kidding about the wheelbarrow, backupjesus- but I'd hate to see the money i've worked hard to save turned into watery poop, which does seem like a possibility.
posted by paul_smatatoes at 1:24 PM on September 20, 2007

I'd hate to see the money i've worked hard to save turned into watery poop...

Ewwwww. Then your concern is really inflation, which a weak dollar may feed into, but which is easier and cheaper to guard against than currency risk. Have you considered TIPS (or a cheap TIPS-holding mutual fund) or I Bonds?
posted by backupjesus at 1:33 PM on September 20, 2007

Another approach, if you are really just worried about inflation eroding the value of the dollar, is to invest in things that do ok with inflation. This book seems to recommend:

# Inflation-linked bonds
# Exchange-traded inflation futures
# Commodities and commodity indexes
# Gold
# Real estate
# Timberland
# Energy

Of course, these all carry their own risks.
posted by procrastination at 1:34 PM on September 20, 2007

Right now, money market accounts are handily beating inflation. No worries.
posted by mpls2 at 1:40 PM on September 20, 2007

Right now, money market accounts, which aren't FDIC insured, are backed by illiquid credit derivative obligation securities which may be completely worthless. You can lose money in an MMA.

Meanwhile, the M3 is expanding at an annual rate of 9% (14% by some estimates, although I think they're fringe/wacko estimates). This single action, which got almost no attention compared to the Fed Funds rate cut and "Helicopter Ben's" discount-window rate cut, will expand the money supply considerably.

People like mpls2 who believe that their money market accounts are safely outpacing the "core CPI" need to have their premises examined.
posted by ikkyu2 at 2:48 PM on September 20, 2007

Money market deposit accounts are FDIC insured. I'm assuming that's what mpls2 is talking about.
posted by marionnette en chaussette at 3:04 PM on September 20, 2007

Money market accounts are insured if they're at a bank. (Many financial institutions have a "banking" segment just for this.)

Money market mutual funds are NOT insured. People use the same phase (money markets) for both, so find out which you're talking about.
posted by small_ruminant at 4:16 PM on September 20, 2007

If you want to hedge against the total breakdown of society, Andrew Tobias has recommended a stash of silver dimes, since it's a well-understood unit of precious metal that is small in size and value to be useful in a postapocalyptic world.

My favorite advice I once heard someone give for a store of value in a postapocalyptic world was to lay in a stash of hard liquor for barter. (The other half was to lay in a stash of weed, but I think that would be easily available and dirt cheap quite quickly following the end of law enforcement. Liquor you can trust not to blind you, not so much, and you hold onto your single malt Scotch until society stabilizes enough that it's ridiculously valuable because no one's making it or shipping it across the Atlantic anymore.)
posted by TheOnlyCoolTim at 6:16 PM on September 20, 2007