Recently, Aunty has been reading about the Chinese yuan (or renminbi) becoming a world reserve currency when the IMF (International Monetary Fund made up of international bankers) meets in October. If this happens, then international trades, purchases, exchanges, etc. can be done with Chinese money. Currently, the US dollar is the dominant trade currency, followed by Euros, English pounds, and Japanese yen. Adding the Chinese yuan to the mix may have extreme financial consequences.
What is a world reserve currency?
It is the acceptable form of money for international trade, and somewhat regulated to ensure that it is kosher. If Timbuktu wants to buy oil from Saudi Arabia, Timbuktu needs to buy US dollars (or another world reserve currency) to complete the the purchase. In the older days, gold was the standard of trade. In today’s fast and frenzied world, the standard of value for trade is any of the world reserve currencies, and more than likely, the US dollar.
China is scary
The US and China are rivals, yet they are very much dependent upon each other. China can materialize fake growth (building empty cities), manipulate financials, and act with impunity (no fear of consequences). It is a communist country with a controlled citizenship, sort of like the Queen of Hearts from Alice in Wonderland. China owns a lot of US dollars as well as a lot of our US debt. The US is the largest buyer of Chinese exports.
If the yuan becomes a world reserve currency, what can happen?
Some experts say that it can be a huge opportunity to building wealth. That sounds pretty good, and then the next question would be, “HOW?” since we already know the WHEN – October 2015. [Update: it didn’t happen at the IMF October meeting in Peru this year – so experts are now predicting NEXT year October 2016.]
BAIDU and BABA
Recently, Aunty was playing with these 2 Chinese company stocks which are traded on the US stock market. BAIDU is the Chinese equivalent of Google, and BABA the equivalent of eBay. Billions of people, badabee badaboom, Aunty played some options (a future post) on both stocks and then the dang Chinese government began to de-value the yuan.
What is going on with that scary country? Aunty likes their food but not their moves. After a financial whack on the hand (not too bad), it was time to visit some experts.
Stansberry’s Sjuggerud strategies
Aunty subscribes to tons of newsletters. Some are free, some are cheap, some are not so cheap but come with money back guarantees. Stansberry Research was either free or cheap and their daily emails are very informative. Dr. Steve Sjuggerud (pronounced sugar rude) is one of their advisors, and just the other day, his offer to subscribe to his monthly newsletters came with some timely bonus reports about how to benefit from the yuan becoming a world reserve currency. For $39, Aunty subscribed for a year, and got the bonus reports with the potentially wonderfully profitable advice. Here they are, in a nutshell:
Funds A few were a little beyond Aunty’s comfort zone such as certain Chinese bond funds or opening an account with Everbank. FXI (iShares China Large-Cap Fund) sounded pretty good since it is a fund that holds China’s 50 biggest and best companies that trade in Hong Kong, but Aunty is not sure about its fees.
House Another bonus report was about taking advantage if the US dollar becomes weaker by getting into investments that act like a hedge (protection). The hedge was to buy a house. The reasoning is that interest rates are so low and that homes are at bargain prices right now. Okay, it may be true about interest rates, but houses in Hawaii are NOT at bargain prices. Still, Aunty tends to think this is a good idea, even in Hawaii, and almost dreads to think of what will happen to our real estate once rich Chinese people decide to buy in Hawaii.
Stock Related to housing and in the real estate game of buy, fix and sell is the Blackstone Group, stock symbol BX. Currently it is $38 and it pays dividends. With its current pricing, the dividends return 7%! Hmmm. This is a looker! [Update Aug 2015: Almost all stocks took a beating after the Chinese government AGAIN devalued the yuan. BX dropped to $32 and is recovering. At current pricing of $34, it now provides dividend income of 8%, which is not shabby at all. Still, only invest what you are willing to lose if you cut your losses.]
Gold and silver This was not surprising – in times of uncertainty, precious metals are safe havens. However, rather than buying ETFs (exchange traded funds that “hold” gold and silver for you) or bullion or bars, the recommended investment are collectible coins, specifically older gold Saint-Gaudens or Morgan silver dollars, in MS64 or MS65 grades. (Aunty forgets how she found him, but Rich Gordon is the man at Eastern Numismatics. If you want to start off with a coin of interest or a roll of Silver Eagles, ask him for his help and expertise at (800) 835-0008 ext. 2300. He accommodates us Hawaii people by burning the New York midnight oil and calling his Hawaii clients late in the day or early evening.)
Sharing is caring
Aunty is not sure if sharing this info is against the subscription rules. If it is, then please, somebody let Aunty know and this post comes down. Aunty has a feeling that Dr. Sjuggerud’s True Wealth newsletters will be very worthwhile reading. Hopefully you will find his advice here to be worthy of thought, if not action.
Meanwhile, Aunty still likes BAIDU, and BABA. It is just too bad that they don’t seem to care about Aunty.