ETF Expert

The U.S. dollar is hovering at 5-month lows. And there's no shortage of economic prognosticators who believe that the U.S. dollar's devaluation is in the early stages of a total meltdown.

Jim Rogers opined that the S&P 500 could go to 50,000 and it wouldn't matter because the dollar will be worthless. Nouriel Roubini, widely credited with "calling" the financial crisis, explains that the Chinese yuan is ready to overtake the US dollar as the world’s reserve currency. Heck, Addison Wiggin wrote The Demise of the Dollar in 2005.

Regardless of whether or not you believe in the doom-n-gloom here in June, adequate diversification of your portfolio alone warrants some attention to the possibility; that is, you do not have to be a "gold bug" to see the potential of hard assets; you don't have to be a dollar hater to recognize the growth in foreign countries that do business in local currencies.

Here are 3 ETFs that should respond to further devaluation of the U.S. dollar:

1. Silver Trust (SLV). Gold gets all of the attention, as predictions for $2000 an ounce seem prevalent. That's a 100% move form current levels. Yet the very same folks who see gold reaching inflation-adjusted highs believe silver will be $30 an ounce. That too represents a doubling in value. Yet silver has the advantage of having precious metal appeal as well as industrial usage. So with China's huge upswing in demand for all commodities, one might consider SLV for a combo hedge/practical growth story.

2. CurrencyShares Australia Trust (FXA). For years, the Australian dollar had been climbing at an alarming rate against the U.S. dollar. The resource-rich, island nation had some of the most attractive interest rates for carry-trading currency investors who borrowed the yen and invested in "koalas."

The commodity bust in July 08, unwinding of the carry trade, and global financial credit crunch of Sep/Oct 08 collectively sent investors fleeing everything other than the U.S. dollar, Japanese yen and U.S. treasuries as safe havens.The Australian dollar actually fell 40% against the U.S. dollar in roughly 3 months.

Now, however, the financial world has stabilized, leaving the world to deal with their respective recessions. However, the U.S. has been attempting to solve its home-spun catastrophe by printing U.S. dollars that it doesn't actually have. In so doing, countries that have active trading relationships with China and a smaller dependency on the U.S. are likely to see sharp appreciation in their currencies.

3. Powershares Dollar Bearish Fund (UDN). If you simply believe the dollar is toast, buy some jam. The Dollar Bearish Fund has gained only 3% YTD, but is firmly above its 50-day and 200-day moving average.

Need more protection against the dollar? Consider foreign bonds from the "Ultimate Bond ETF Portfolio."

If you'd like to learn more about ETF investing… then tune into "In the Money With Gary Gordon." You can listen to the show "live" or via podcast or on your iPod at this link.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.