You Have No Choice But to Buy Canada

On Wednesday, I said many American would-be retirees were “dead men walking” unless they took immediate steps to shore up their retirement accounts.

That’s because most Americans haven’t saved enough for a comfortable retirement in the U.S.

In fact, according to Federal Reserve figures the median household headed by a person 60 to 62 with a 401(k) account has less than one quarter of what is needed in the account to maintain their standard of living in retirement.

This means a lot of baby boomers will end up having to work well into their 70s unless they take action to shore up what they have and work on boosting their savings.

I listed three steps you could take to ensure greater financial freedom when you retire. You can find them on the IL website here.)

One of the most important of these steps is to make sure the money you’ve saved is safe by diversifying outside the U.S. dollar.

There are worrying signs that investors are losing faith in the buck.

One of these came recently, as Arab uprisings caused big swings in commodities and stock markets around the world.

In times of crisis investors normally rush to the perceived “safe haven” of the U.S. dollar. Think 9/11 or the collapse of Lehman Brothers.

But during the recent spike in volatility the dollar went down in value.

Now, that could just mean investors aren’t too concerned about what’s happening in Libya or Egypt. But this doesn’t add up. Because as the dollar fell, that other traditional safe haven, gold, rose.

One explanation is that investors are starting to wise up to the fact that the Fed is deliberately devaluing the dollar. And that it will continue to do so as long as America’s debt load remains so burdensome.

To keep the U.S. stock market afloat the Bernanke Fed has expanded its balance sheet by $2.528 trillion. Basically, this means the Fed has sucked up $2.528 trillion of U.S. government-related debt.

And as it has sucked in all this government related debt, it’s breathed out dollars…dollars that weren’t there before.

There’s a simple rule that says the more of something there is in the world, the less each unit of that thing is worth. For instance, if you had $100, each one would be more precious to you than if you had $1 million.

This is bad news for savers. But it’s great news for Washington. Because the more the dollar loses its value, the easier America’s dollar-denominated debt load will be to repay to foreigners.

All of this means one thing: The long-term trajectory of the dollar does not look good. Smart investors will diversify their savings into other currencies.

Why the Canadian Dollar Is a Buy Now

One easy way to do this is to buy the Canadian dollar by way of the CurrencyShares Canadian Dollar Trust (NYSE:FXC). This is an exchange-traded fund (ETF) that tracks the exchange value of the Canadian dollar.

There are lots of reasons to love the Canadian dollar. Most important, it’s backed by Canada’s massive natural resource wealth.

But there are other reasons too. In fact, according to former chief North American economist for Bank of America-Merrill Lynch David Rosenberg, there are four other key factors supporting the Canadian currency:

1) The organic strength of the Canadian economy

2) A monetary policy that has not relied on excessive money printing

3) A pro-business federal government

4) A national balance sheet that is about the strongest in the industrialized world

The bottom line is this: As long as commodities are booming and the Canadian economy stays in good shape relative to the rest of the developed world, the Canadian dollar will be a great diversifier for your savings.

And buying the CurrencyShares Canadian Dollar Trust (NYSE:FXC) is an easy and low-cost way to add Canadian dollar exposure.

In fact, with Fed insisting on devaluing the dollar, you have no choice but to find a better store of value for your hard earned savings.

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