American Investment Services, Inc.

Disciplined, Diversified, & Cost Effective

Apr. 2005 – Dollar Crisis? Here We Go Again . . .

In early 1995, the dollar was plunging against most major currencies and the financial media was piling on. We are struck by the similarity between recent headlines and those of a decade ago:

The “mainstream media” was dead wrong. The chart below shows what happened after the dollar bottomed out in April 1995. The trade-weighted dollar rose nearly 40 percent against other currencies:

We do not suggest that the dollar is poised to rebound, nor are we writing its epitaph. We have no special insight on the outlook for exchange rates. Nor do any of the staff economists of our parent organization, the American Institute for Economic Research, claim to know whether it is better to hope for a stronger dollar as a means to cheaper fois gras or to hope for a weaker dollar in order to boost the returns on one’s international stock funds.

So what is an investor to do? Diversify. The concept doesn’t make headlines, but it will serve investors well over the long term. We recommend holding a portion of one’s portfolio in gold-related assets and in foreign-currency-denominated assets as the most appealing solution to dollar anxiety.

Also in This Issue:

Quarterly Review of Investment Policy
Small Caps and Fund Capacity – When the Party’s Over
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow-Jones Industrials Ranked by Yield