Ingrid Johnson’s blog

If you watch the news you have probably heard a lot about dollar depreciation these last few months. As part of the economic stimulus package, the Federal Reserve has had to keep interest rates at historic lows (thereby making the “price” of dollars very cheap) while borrowing enormous quantities of money from foreign and domestic lenders. These actions have weakened the dollar against several foreign currencies.

As a savvy investor, you should be worried about the decline of the dollar, because this directly hurts the value of your paycheck. However, like everything else in life, economic trends have two sides to them. In our case, dollar depreciation can actually be your opportunity to invest in other currencies. Even if you’re not particularly concerned about the recent decline, investing in foreign currency will help you to diversify your portfolio, which is always a good idea.

The most important thing to remember is that investing in a foreign currency must never be considered in isolation, so mind its impact on your entire portfolio. For example, let’s say you have $20,000 in U.S. investments and you read an article that is very positive on Brazil. Should you go ahead and invest $5000 in Brazil? If you do, you will have 20% of your overall investments in only one country. Ask yourself if you want that much exposure, especially since the Brazilian stock market is known to be quite volatile.

If however, you are still interested after careful consideration of your own investing portfolio, here are a few suggestions to gain exposure.

1. Stock of Companies with Multinational Operations – Many big American companies derive a huge portion of their revenues from abroad. This means that when foreign currencies do well versus the dollar, the profits and stock prices of such companies get a boost. Examples of such companies are Coca Cola, Microsoft, IBM, Pfizer, McDonalds etc.
2. Foreign Currency ETFs – These trade just like stocks on American stock exchanges and are backed by baskets of foreign currencies. In other words, owning a Euro ETF is like owning a money market account in Europe. CurrencyShares have a wide range of ETFs that provide exposure to different currencies. Another example is the SPDR Barclays Capital International Treasury Bond ETF. Make sure to check an ETF’s liquidity and trading commissions before buying it.
3. Foreign Bond Funds – These mutual funds invest in bonds issued by foreign governments, i.e. they receive interest payments from foreign governments in foreign currency. As the foreign currency strengthens, the value of the interest payments converted into dollars goes up. Examples of such funds are Templeton Global Bond Fund and Aberdeen Global Income fund. Do watch out for high management fees and other costs before you purchase any mutual fund.
4. Foreign CDs and Savings Accounts – Some American banks (notably Everbank) offer CDs denominated in foreign currencies. These CDs offer a higher rate of interest than dollar-denominated CDs, but carry the risk of exchange rate fluctuation, i.e. you may get back fewer dollars than you put into the CD if the dollar strengthens instead of weakening against the foreign currency. Everbank’s CDs are FDIC-insured against the failure of foreign banks though, which is helpful. For example, the 1-year Everbank WorldCurrency Australian Dollar CD offers 3.5% whereas the most competitive 1-year US CDs offer less than 2%. Unfortunately there is a high minimum amount you need to invest to open a WorldCurrency CD (around $10,000).

It is important to make sure that all foreign currency investments match your ability to take on risk. Go with reputable institutions and read the fine print on all your investments before you sign the dotted line.

I’d love to hear of any other ideas you may have about investing in foreign currencies, or any questions about the logistics of investing in the above.

This is a post from Ritu Agrawal, who learned a whole lot about the technical side of investing at JPMorgan Chase. Read more about her at her bio page.

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Read more of Four Ways To Invest In Foreign Currencies…

One of my biggest pet peeves was when teachers would email you before class started and ask you to do homework. I didn’t understand how they could expect us to have everything done for the class already. I would be mad if I got to a class and they expected us to hand something in. It didn’t make sense.

I was at a community college which made it even more annoying. They wouldn’t take their jobs seriously enough that it would really matter if we did it before hand but we were still expected to do it. It was one of the most annoying things ever.

A triplet can be the preparation of the gem, opal. It can be something in math, It occurs in music. It can be a lens, as in eye glasses. A tandem bike with 3 seats is called a triplet. But the kind of triplets I’m talking about are babies.

Triplets occur when three babies are born at the same time. Identical triplets occur very rarely, only once in every 500,000 births. The Burn triplets made news in 1988 when they were in a fire in Texas at just 17 months of age. Their mother was killed and the triplets all suffered terrible burns that scarred their faces for their lives.

They are on the news again because at 21 years old now, they are going through treatments to fix their damaged skin. They are all three beautiful young women with scars on their faces. I hope the treatments will help the Burns triplets.

I think they are beautiful no matter what they look like. When you read interviews with the girls, they seem to be amazing.

AP - Presidents get elected to run the nation. Some days that means knowing how to heal it. For the first time since winning the White House, President Barack Obama faces such a moment Tuesday at Fort Hood.

Read more of Pres. Obama pressed into role as nation’s healer (AP)…

AP - Hurricane Ida, the first Atlantic hurricane to target the United States this year, plodded early Monday toward the Gulf Coast with 105 mph winds, bringing the threat of flooding and storm surges.

Read more of Late-season hurricane takes aim at US Gulf Coast (AP)…

Sometimes, it’s difficult to get a sense of what people in other countries have to deal with. Luckily, the guest post today addresses this, even in a very small scale.

A massive stimulus plan, reduced consumer spending, increased unemployment – we aren’t just talking about the United States here. The effects of the American financial crisis have stretched worldwide, and Australia has not been left unscathed. The current recession’s sticky tentacles have managed to drag down with them many economies that before 2008 were functioning and growing quite well. Unfortunately, Australia is one of those countries and here’s several first hand effects that I noticed.

1. Consumers Buying Less
   With credit restricted in both the US and Australia, consumers are tightening their belts when it comes to purchases. A ‘Cash for Clunkers’ vehicle trade-in program in America paired with a nearly trillion dollar stimulus package, tends to overshadow a 26.5 billion (USD) Australian package, but for a country like Australia that is used to running a budget surplus and with a proportionately smaller economy, such numbers come as a shock. With no promises being made on either side that these plans will fix the economy and unemployment still rising in both countries, expectations are being tempered, leaving consumers wary as to whether they should dip their toes back into the spending waters. It is worth noting however, that consumer confidence is rising in Australia and has recently hit a two-year high.

2. Buying Better & Smarter
   One of the benefits to the consumers of both nations during the financial crisis fallout has been a reawakening to the art of the deal. For many consumers used to paying sticker prices for vehicles, appliances, and electronics, the sudden abundance of great deals and lower prices have provided those who have money to spend the chance to buy the best products at a fraction of what they were offered at just a year or two ago. Lower housing prices, retail discounts, and government assistance programs such as the Cash for Clunkers program and first time homebuyer’s tax credit in the US or the Australian stimulus package’s cash to low income families, have somewhat helped to ease the strain on consumers, but have far from mitigated the consequences to retailers and manufacturers during the recession.

3. Eating Out Less
   Unfortunately, there is a downside to certain instances of consumers spending less on products, more so than just the effects on economic growth. While the differences in the foreclosure status between the two countries are significant, it doesn’t mean Australia hasn’t been affected by the ripples of the credit crisis. The Australian banking system hasn’t been affected as adversely as in the US, however; rather than shutting off available credit to consumers as has largely been the case in the US, Australian banks have upped the ante when it comes to borrowing, tending to continue to offer credit to consumers and businesses but at higher interest rates. The effects on both sides of the Pacific result in tighter credit, which in turn affects consumer spending all the way down to the food they eat.

   Credit constraints, paired with rising job loss in both countries and fear regarding the future, leaves many families with less to spend on food products and often looking for cheaper alternatives at the grocery store. Lower prices typically does not equate to healthier food either. Often, sale or discounted foods offer lower nutritional values and benefits when compared to more costly food products, and therefore promote less healthy eating during times of economic distress.

4. Increased Saving: A Positive Aspect of Recession
   On the positive side of the recession’s effects upon consumers is increased saving. People around the world, have learned the valuable lesson of preparing for the future and unforeseen events through increased personal savings. Nowhere has this lesson hit home harder than in the United States where personal savings levels dipped into the negative just several years ago. The recession has awakened consumers to the benefits of saving and has pushed personal savings levels back into the black, moving to nearly seven percent in the US this year. Conversely, as saving levels increase, spending decreases, which means consumers are tightening their belts when it comes to larger purchases.

   It’s yet to be seen as how the recession will affect Australian personal savings rates as statistics aren’t readily available, but anecdotal evidence points to increased savings down under too. While savings rates have steadily been declining since the mid-80s, with higher interest rates available and consumer spending down, it may be assumed that Australian personal savings rates will increase slightly, at least temporarily, as people hunker down for the short term.

5. Lower Consumer Spending Hits Small Businesses Hard
   The changes in consumer spending mean a shift in the way many businesses interact with and meet consumer needs. While nearly all businesses have been adversely affected by the recession, small businesses in particular have taken a hard hit due to their lack of recourses and available cash flow to ride out a prolonged economic downturn. Again, rising interest rates in Australia and lack of available credit in the US has made it difficult for businesses to tap sources of credit for continued cash flow. This negative impact on small businesses leaves their owners and employees less willing to spend, and thus results in a snowball effect that minimizes consumer spending.

6. Even Optimists are Wary
   While stock markets around the world are on the rise, and there is now a glimmer of hope for a worldwide recovery, many consumers are still hesitant to resume there previous spending levels. While many in the US and Australia are hopeful that within the next year more signs of a recovery will become evident, few expect things to return to where they were just years ago anytime soon. It certainly appears that Australian consumers will most likely be feeling the effects of a recovery sooner than those in America. However, even the most optimistic consumer on either continent must have inklings of the acute possibility that such a crisis could occur again, whether due to looming mortgage resets in the US, continued restricted and pricey credit, or a still unforeseen event that could act to alter the way in which we spend our money.

About The Author

Kris writes about personal finance for an Australian credit card comparison website offering a range of cash back credit cards that help everyone save money. You can read more of his writing on The Credit Letter.

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Read more of 6 Ways the Recession Has Changed Consumer Spending in Australia & the USA…

In a victory for President Barack Obama, the Democratic-controlled House narrowly passed landmark health care legislation Saturday night to expand coverage to tens of millions who lack it and place tough new restrictions on the insurance industry.

Read more of House passes health care bill on close vote (AP)…

It was really frustrating. I am worried that it is going to break down any second. I don’t know what to do about it. I’m worried about driving it to work in the morning. Maybe after work I will stop at a repair shop and see if they can tell me what is wrong with it.

It almost seems like the transmission is dying. It keeps making these really bad sounds and shaking a lot. I guess I will just have to wait and see what is wrong with it. I really hope that it won’t cost me too much to fix. It will though; I’m sure.

I recently watched the film Story of Stuff, which is a film about the lifecycle of material goods. While the video has its biases and has thus become politically controversial, I still think the video is worth viewing with a critical mind. There is some good debate on the film’s Wikipedia page, so I won’t go into it here.

One thing that I did like was her discussion of planned vs. perceived obsolescence. Here are the definitions from the film glossary:

Planned obsolescence: designing and producing products in order for them to be used up (obsolete) within a specific time period. Products may be designed for obsolescence either through function, like a paper coffee cup or a machine with breakable parts, or through “desirability,” like a piece of clothing made for this year’s fashion and then replaced by something totally different next year. Planned obsolescence is also known as “design for the dump.”

Perceived obsolescence: the part of planned obsolescence that refers to “desirability”. In other words, an object may continue to be functional, but it is no longer perceived to be stylish or appropriate, so it is rendered obsolete by perception, rather than by function. Fashion is all about perceived obsolescence, and it could be said that perceived obsolescence is the number one “product” of the advertising industry.

Non-Consumer Alarm!
This made me think about how companies have made easy it is to identify “non-consumers”, which usually leads to them being mocked somehow. Let’s take cars. Models change very often, even if just slightly, so it’s very easy to tell that my car is 10 or 15 years old. My wife and I are often told by our friends and family that our cars don’t match our job titles/income levels. Same with cell phones. If your phone doesn’t have at least a QWERTY keyboard these days, it’s a freaking antique.

As for clothes, I’m always happy that I’m a guy because my closet of long-sleeved dress shirts, cotton polo shirts, slightly baggy jeans, and cargo shorts have managed to last me for over a decade now. Meanwhile, to be a mainstream woman, you went from flare jeans to low-ride jeans to the new thing - skinny jeans. I won’t even go into shoes (UGGs??).

Try it next time you’re in a crowded area, at work, or visit someone’s house. See if you can pick out who hasn’t bought the newest version of something in the last few years.

*You can either watch the video in Flash at the main site or below on YouTube. The part about planned vs. perceived obsolescence is at 12:35 (total length: 20 minutes).

Read more about Planned vs. Perceived Obsolescence…

The Senate has voted to extend unemployment insurance benefits for up to 20 weeks. The 24 billion dollar bill also expands an eight thousand dollar tax credit for first-time homebuyers. The legislation is expected to sail through the House.

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