The New World Order
My job takes me all over the world.
So far this year, I’ve traveled on your behalf to visit Singapore, Cambodia, Thailand, Vietnam and Brazil. And we’re not even at the halfway point yet!
These trips make up the backbone of my research into the best investments the world has to offer. I pound the sidewalk. Talk to locals. Meet with experts on the ground. And do my best to get “under the hood” of the places I visit.
I always have one question in mind when I travel: What makes this place tick? Sometimes the answer is the polar opposite of the Wall Street consensus. Then I know there’s a real opportunity to profit.
But not all my research is carried out on the ground. I also find myself staying up late at night reading research reports with boring titles, such as the latest one from the World Bank – a 174-pager called “Multipolarity: The New Economic Order.”
Now, I’ll be the first to admit: It doesn’t exactly scream excitement.
And truth be told, I’d much rather have my boots on the ground somewhere exotic than be wading through chapters with names like “Macroeconomic policy disparities, selected actual and potential growth poles among advanced and emerging economies.”
But sometimes these kinds of reports contain invaluable nuggets about the big-picture outlook for the global economy. And the recent World Bank report doesn’t disappoint.
You see, according to the report, by 2025 the dollar’s reign as the world’s reserve currency will be well and truly over.
Or as the economists at the World Bank put it (emphasis added):
The international monetary system is likely to cease being dominated by a single currency. Emerging-market countries […] will become key players in financial markets. In short, a new world order with a more diffuse distribution of economic power is emerging.
If you have been following International Living Investor for some time, the idea that the dollar’s days as the world’s reserve currency are numbered won’t come as a surprise.
But the World Bank report sheds new light on the issue. In 2025 – just 14 years from now – the World Bank says the world economy will be run according to a “multi-currency” understanding, one in which the dollar is joined by the euro and Chinese yuan (also known as the renminbi).
It’s no wonder the dollar hit a three-year low versus a basket of other major currencies recently. The smart money sees the writing on the wall for the buck: It’s now a matter of “when” not “if” it will be knocked off its reserve currency perch.
On Wednesday, I recommended you add shares of the Wisdom Tree Emerging Currency Fund (NYSE:CEW) to your global portfolio.
This easy-to-buy ETF gives you exposure to a basket of emerging market currencies, including the Mexican peso, Brazilian real, Chilean peso, South African rand, Polish zloty, Israeli shekel, Turkish lira, Chinese yuan, South Korean won, Taiwanese dollar, and Indian rupee.
If you make one currency diversification play this year, make it CEW.
But if you’re looking for a more targeted play on the new currency world order coming down the pike, consider the Wisdom Tree Dreyfus Chinese Yuan Fund (NYSE:CYB).
This seeks to achieve total returns reflective of both money market rates in China available to foreign investors and changes in value of the yuan relative to the dollar.
As the Chinese currency takes a more central role in global trade, CYB will climb…and provide a great hedge against a weakening dollar.
The new world order is coming. You can either prepare for it now. Or you can watch the value of your dollar-based savings erode over time.
The choice is yours.
Good luck and good investing.