What the Currency Market’s Turmoil Means for You

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

Beware the Currency Market Turmoil

There have been two big trends influencing the markets during the past several months, particularly since early December, and they are the decline in oil prices and the rise in the value of the U.S. dollar vs. rival foreign currencies.

I wrote about both of these trends in last week’s issue, as well as in the most recent issue of my Successful ETF Investing newsletter.

This week, the big noise came from another currency market, as the Swiss National Bank, or SNB, unexpectedly removed its cap of the franc to the euro. Why was this done? Well, because the SNB thinks that the European Central Bank, ECB, is going to implement some type of a very large quantitative easing (QE) program when it meets next week, and that move would be euro bearish and Swiss franc bullish.

It also will likely be dollar bullish, and that means more upside for the greenback and the U.S. Dollar Index.


Now, another thing the currency market turmoil is telling us is that the global economy is a treacherous place right now. There’s a lot of stress being put on currency markets in anticipation of the ECB’s QE decision, and that’s causing the dollar to rise — and dollar-denominated assets such as oil and other commodities to falter.

The chart below of the benchmark commodity index, the DB Commodities Tracking Index Fund (DBC), tells us all we need to know about the value of dollar-denominated assets and their plunge during the past six months.


At this juncture, investors need to really be aware of the machinations in the currency markets, as the fate of the greenback has much wider implications for oil, commodities, multi-national corporate earnings and bond yields.

Not being aware of this situation is both negligent — and flat-out dangerous.

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Deeper Ways to Be a Better ETF Investor in 2015

In last week’s issue, I offered you 10 suggestions on how to be a better ETF investor in 2015. This week, I want to elaborate on the first three of those suggestions, as I think each deserves a little deeper analysis. Let’s take a closer look now.

1) Find more money to invest in ETFs. This may seem a bit confusing, but it’s really not. When I say find more money to invest in ETFs, I am not suggesting that you go out and get a new job so you can earn more money (although there’s nothing wrong with that). What I am suggesting is that you alter your current asset mix so that you can rotate out of higher-cost, higher-risk assets such as mutual funds and/or individual stocks and rotate into lower-cost, and often lower-risk, exchange-traded funds.

Also, if you have money tied up in, say, a savings account that’s paying you virtually zero interest (returns here actually are negative when you factor in inflation), then it’s time you consider moving that money into your brokerage firm and buying low-risk ETFs. Finally, if you have money tied up in an old 401(k)-type account from a former employer, you need to do an IRA rollover so you can get out of restrictive fund choices and move money into much-more-flexible ETFs.

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2) Consolidate your accounts at one brokerage. Believe it or not, this is one of the biggest problems I see when analyzing investor portfolios. In fact, many prospective clients of my advisory firm, Fabian Wealth Strategies, tell me they have relationships with half a dozen or more brokerage and financial firms.

The way I see it, there is no good reason to have more than one brokerage account. Quality firms such as Fidelity, Schwab, TD Ameritrade or Vanguard aren’t going anywhere, and you only need one to take good care of your hard-earned capital. The only real byproduct of having multiple accounts at multiple financial institutions is a negative one, and that is confusion. More paperwork, more passwords, more phone numbers and more and more self-inflicted problems, and, well, just more of what you don’t need in your life. I recommend moving your assets to one brokerage firm, making life a whole lot easier in 2015.

3) Start a Roth IRA. If you qualify for a Roth IRA, and if you don’t have one, then you are only hurting yourself and your overall investment returns. Why? Well, because a Roth IRA is a tax-free savings account. The key word here is FREE.

When you have a Roth IRA, there are no taxes on withdrawals of your contributions at any time, nor are there any taxes on earnings in retirement. There are also no required minimum distributions with a Roth. You can contribute $5,000 per year ($6,000 if you’re over 50), and while this may not be a lot of money to you, the tax-free aspect of a Roth IRA automatically gives you a better return on your investment dollars than you would get with a standard IRA, or with a regular investment account. So, if you don’t have a Roth IRA and you qualify, then now is the time to open one up.

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Next week, we’ll take a deeper look at three more ways to be a better ETF investor in 2015.

NOTE: Fabian Wealth Strategies is a Securities and Exchange Commission-registered investment adviser, and is not affiliated with Eagle Financial Publications.

Rogue Change Hurts

“Change hurts. It makes people insecure, confused, and angry. People want things to be the same as they’ve always been, because that makes life easier. But, if you’re a leader, you can’t let your people hang on to the past.”

— Richard Marcinko, “The Rogue Warrior”

Although many of us say we want to change our lives, particularly with those New Year’s resolutions, I think very few of us actually want to embrace the discomfort associated with change. Why? Well, because like former Navy SEAL Team 6 creator Richard Marcinko, a.k.a. The Rogue Warrior, says, “Change hurts.” Well, sometimes, you have to hurt to grow. And, if you are a parent, businessman, corporate manager or in any field where you have to motivate others, then you must make yourself and your people know that change is both necessary and essential to becoming better in life.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Weekly ETF Report readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.

In case you missed it, I encourage you to read my e-letter column from last week about why the market could be volatile in 2015. I also invite you to comment in the space provided below.

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