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Yoshikami: How to Profit off a Weak Dollar

Monday, 25 May 2009 | 8:55 PM ET

With U.S. deficits rising at a record pace, the possibility that America will lose its AAA investment rating is becoming more and more plausible.

While this scenario far from inevitable, there is certainly concern that rising debt levels will decrease the creditworthiness of the U.S. government. The result will be a weaker dollar.

With the U.S. economy struggling as fundamentals weaken and deficits rise, investors would be wise to understand the consequences of dollar weakness and make adjustments to investment strategy.

The most obvious investment choice for a weak dollar is commodities. Jim Rogers, in a recent CNBC interview, discussed his view that commodities are one of the few assets he sees as having improved fundamentals. In other words, it hasn't been negatively impacted by U.S. currency challenges.

AP

There are many reasons to invest intangible assets including, rising international consumption and inherent shortages in certain commodity products. And to be sure a weak dollar will likely increase the attractiveness of commodities as a part of an investment strategy.

Assets like DJP (commodities index) are an easy way to add this hedge to your portfolio.

International investments also have appeal in a weakening dollar environment. Assets denominated in local currencies can help mitigate the monetary impact of a weakening dollar. Additionally, U.S. multinational corporations that derive a significant percentage of their revenue from overseas operations also hold promise as an investment hedge.

This includes companies like McDonald's and Coca-Cola . And one should not preclude owning other foreign currencies directly as a way to insulate a portfolio strategy from dollar weakness.

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Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). Michael oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. He appears regularly on CNBC and CNBC Asia and can be reached directly at m@ycmnet.com.


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