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  • the_nervous_resistor the_nervous_resistor Nov 23, 2004 1:25 PM Flag

    Greensspan on gold...

    In an effort to light a candle against the darkness of currency devaluation, here are a couple thoughts. I'd appreciate your comments.

    (1) VGPMX is Vanguard's precious metal stock fund. The holdings are 88% overseas. Entry minimum is high at $10,000 min. Great no-load fund family. The money management is done by a British firm, as I recall. The hedge against devaluation is both the precious metals business and the high non-US dollar denominated equity at 88%. Canadian and Australian companies lead the holdings. I personally own this.

    (2) BEGBX is an International bond fund operated by American Century in Kansas City (good ribs). The money is actually managed by JP Morgan. No load of course. The investments are in the government bonds of foreign countries like Germany, Japan, and France(yuck). The fund explicity does not hedge more than 25% of its portfolio, meaning more upside as the dollar falls. (Any comments on whether this is right or not?) Yield is over 7%, so you get good interest return along with the exchange return. I own this fund.

    (3) DODFX a no load stock fund with 80% of assets overseas in at least three countries. Again, a currency hedge. Run by Dodge and Cox in San Francisco. Value oriented, low holdings turnover. Good return. I own this fund.

    Clearly, these investments carry risk (3-year beta's for VGPMX, BEGBX, and DODFX are 0.69, 1.51, and 1.20). Portfolio allocation for foreign assets is another big question. Do you go more than the traditional 10%? How about 20 to 30%?

    Another question to open is how do you handle your mortgage now, given what interest rate increases will soften demand for housing and will complicate the net present value of your payment stream.

    Over to you.


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