5 Currencies Investors Can't Ignore

05/06/2013 7:45 am EST

Focus: CURRENCY

Chuck Butler

President, EverBank World Markets

Chuck Butler of EverBank World Markets details a new gold savings plan from his company, and shares his favorite world currencies for investors to watch.

Nancy Zambell: My guest today is Chuck Butler, is the president of EverBank World Markets, and he deals in world currencies. Chuck, we were talking a bit earlier about what your mission in life is.

Chuck Butler: Our mission here is to allow individual investors to diversify their investment portfolio, so that a portion of it is outside of the US dollar, to give them a true diversification.

When I talk to a crowd, I always ask how many people own stock, and then I ask them how many people would own just one stock. And nobody raises their hand. So then I say, well, why would you want just one currency?

So, our goal is to get people to diversify outside the dollar, because it just helps them to have true diversification of their portfolio. We do that with currencies and precious metals.

Nancy Zambell: What about precious metals? I assume gold is one that you would be very involved in.

Chuck Butler: Yes, gold, silver, and platinum are the three precious metals that we follow, and that we offer to individual investors.

In the last few days, we announced a new gold savings plan, where people can have as little as $100 a month taken from their checking account, which goes towards the current price of gold. They just keep accumulating these fraction allowances until they actually have an ounce.

Nancy Zambell: So you're actually buying the real gold.

Chuck Butler: Yes, you're actually buying the real gold. We noticed that people were starting to shy away from buying gold because the price had gotten so high. And then in the last couple of weeks, we saw that huge drop. But it's come back quite a bit.

So when we saw the price up high, we thought about what we could do to help people, and this Gold Savings plan was the way to do it.

Nancy Zambell: Do you have to have a minimum amount when you start to invest?

Chuck Butler: No, just $100.

Nancy Zambell: That's pretty darn good. I know that you said you want people to diversify in currencies and precious metals, but there are certain things economically that are preventing it right now.

Chuck Butler: What we've seen in recent days and weeks is that a lot of economists and some of the brokerage houses around the country are issuing statements saying that they believe that the US economy is out of the woods, there's no need to diversify outside the dollar, and that the dollar is the place to be.

I just don't see it that way. And it's not because we have customers that buy currencies; it's because I look at things differently than most people do.

I look at all of the reports since the beginning of March, and we've missed on 65% of the economic reports that have come out. We missed on the estimates call-and not to the good side. To me, that doesn't show that the economy is out of the woods.

I think that in the next couple days, we'll see that the Fed actually comes back and backs off their previous statement that they'll be ending quantitative easing soon. I think that they'll probably state more reasons why it should continue. [Editor's Note: He was dead right: the Fed did change its tune.]

Nancy Zambell: So do you think we'll have a QE4?

Chuck Butler: Oh, yeah, I think we'll have...

Nancy Zambell: Four, five, six.

Chuck Butler: Four, five, six. I think that in ten years from now, we could be talking about QE24. I just think that the US economy has become addicted to stimulus, and without the stimulus, it goes nowhere. And it's not really going anywhere with the stimulus, but at least it has something pushing it.

Nancy Zambell: Right, it's still very sluggish growth. And then last week's GDP numbers are what, 2.5%? Which was less than the 3% estimate, I believe.

Chuck Butler: Yes. Actually, they were looking for 3.2%, so 2.5% was not bad, considering that in the fourth quarter of 2012 we only grew at 0.4%. But there was a trailing off at the end of the quarter, and that doesn't bode well for the next quarter.

Nancy Zambell: No, they did say consumer spending numbers were up, which seems kind of strange to me.

Chuck Butler: They were up, and it was very strange to me because of the increased taxes, the payroll tax, and the threat of more taxes coming down the line. But at the same time, we are Americans, and we have a propensity to spend money.

We had tried to rebalance and deleverage ourselves and shape up our balance sheet for the last few years, and that meant not going out and buying something new, and I think it just was a bunch of pent-up frustration on the part of the American consumer.

I don't see the spending continuing. What we saw with the personal income and spending numbers that came out-spending in the month of February was up 1.1%, but in March, it had fallen to just 0.2%.

Nancy Zambell: Do you have any thoughts on what the unemployment rate might be for April when that comes out this week?

Chuck Butler: The unemployment rate is something that's a moving target every month. You have so many people drop out of the workforce, and then they're not counted. You have all the people that are on disability not counted. And all these things go into that unemployment rate.

I more or less look at the participation rate that the St. Louis Fed tracks. In March, the participation rate fell to 63.3% of Americans working. That is the lowest level in this country since 1979.

The government can play games with the unemployment rate numbers, and they can make them keep going down and down and down. But everyone knows what the real numbers are, if you look at that participation rate.

Nancy Zambell: That's true. So basically, if you were going to forecast what the economy was going to do for the next couple of quarters, would you stay pretty much the same, unless we have a major stimulus program?

Chuck Butler: Yes, pretty much the same, or even a little bit weaker. I just think that we're stuck in this rut that we're going to follow for a long time, because the Fed sees that they can keep rates low and inflation low at the same time by building the monetary base and buying all these bonds, but not increasing the money supply. That is something that I think that they're going to hang their head on for a long time.

And by doing so, it doesn't address the unemployment problem. And it doesn't address the debt problems of the country, which I believe have a lot to do with the unemployment problems. But interest rates will stay low, and so housing will do OK, and people will still spend money. But we're kind of stuck in a rut.

Nancy Zambell: So let's talk about the currency. That would be a very nice alternative investment, or I guess an investment to be included in your total portfolio. And this gold savings plan sounds very interesting.

Chuck Butler: We look at the currencies as a way to pick an allocation of your portfolio. Now, we're not people that say you need to be 100% out of the dollar or anything like that. We understand that people need dollars for gas and groceries and giggles and things like that.

But what they need to do is allocate somewhere between 10% and 15%-but no more than 20%-toward currencies. And anywhere you look in the world, there's always a currency that's doing well.

Nancy Zambell: Do you have any favorites right now?

Chuck Butler: My favorites would include China, Singapore, Norway, Australia, and Canada. We always look at fundamentals.

We're not traders that look at technical numbers, because fundamentals will be the things that drive something over a period of time and not day-to-day movements up and down. And those are some of the countries that have some of the best fundamentals in the world. Therefore, we like those currencies.

Nancy Zambell: Do you think that for an individual investor, an ETF of those currencies would be the way to go?

Chuck Butler: ETFs are good short-term solution to buying currencies. We view ETFs as just that-a short-term alternative to buying the actual currency-because you can't get the actual currency out of an ETF.

Most people don't actually have a need for currencies, but you never know. You might end up buying something from a German producer or manufacturer and you need to have euros, and you won't get those out of the ETF.

The reason we say short-term, is that in an ETF, the trust company charges you a maintenance charge on an annual basis for holding that ETF. And those maintenance charges, over the years, just continue to go higher and higher.

We don't like to be charged for holding things, so we normally like to see people actually invest in the currency.

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