"The Congressional Budget Office upped its 2009 fiscal year deficit forecast to $1.2 trillion; add in the stimulus plan, and the deficit could be above $2 trillion," says Tony Sagami.
The editor of The Asia Stock Alert says, "As a result, we believe that the U.S. dollar is in big, big trouble. To protect your portfolio -- or even profit from the falling dollar -- buy Merk Hard Currency Fund (MERKX)."
The advisor explains, "For a long time, we have depended on the confidence and generosity of foreigners, especially the Chinese and Saudi Arabians, to fund our deficit spending lifestyle. Those days, however, are coming to a close.
"With the Federal Reserve Bank cutting its short-term interest rate target to range from 0% to 0.25%, I doubt you'll see overseas investors lining up to buy our next-to-nothing yielding bonds. The U.S. is, unfortunately, a country in trouble and headed for a painful currency devaluation. Inflation is lurking around the corner.
"I never trust the data on inflation; instead, I pay attention to what the big money is doing with their money.
"The last Treasury auction of $8 billion in inflation-indexed notes drew the highest demand in nine years. Even though the yield on the Treasury Inflation Protected Securities, or TIPS, was a crummy 2.245%, the bid-to-cover ratio (a measurement of demand) hit 2.48 - the highest since January 2000.
"This tells me that the big money crowd is expecting inflation to pick up along with government spending. And nobody wants to hold the debt of a country that is experiencing rapid inflation.
"Meanwhile, we believe that the Fed wants to drive the dollar lower. The Fed didn't reduce the target for its fed funds to range from 0% to 0.25% because it is worried about inflation. It chopped rates because they are scared to death of deflation.
"Further, foreign governments now need to keep their money at home to fund their own stimulus programs. That need, plus the measly yields on Treasury debt, is combination that will drive the greenback lower. China and Saudi Arabia are already diversifying out of U.S. dollar holdings.
"MERKX is a way to add some non-dollar-denominated investments to your portfolio. It is similar to a money market fund in that it keeps the average maturity of ]its holdings to less than 90 days and invests primarily in top-quality government debt. Its similarities with money funds end there, though.
"Instead of investing in U.S. government debt, MERKX invests in the debt of foreign countries. Not just any old country - only those of sound, established countries that follow a sound economic, fiscal and monetary policy, such as the Switzerland. The fund does not invest in any emerging market debt.
"Therefore, this $250 million fund, launched in 2005, is a pure play on 'hard' currencies and even includes a small amount of gold in its portfolio. What you end up with is a liquid portfolio of short duration, high credit quality, non-U.S. government debt of countries that pursue sound monetary policies.
"The fund is managed by Axel Merk, who founded Merk Investments AG in Switzerland in 1994. I'd add that the fund has a coveted Five-Star rating from Morningstar.
"If you share my pessimism for the U.S. economy and dollar, the Merk Hard Currency Fund is one that you'll want to own. The minimum investment is $2,500 or $1,000 for retirement accounts, such as IRAs. This no-load fund also doesn't have any redemption fees or minimum holding periods."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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