Crude oil at $125 and climbing? Natural gas at $11 and climbing?

And it’s not just petrol that’s soaring in price or cost, depending on whether you’re buying or selling. Any real good that gets dug up or pumped out the ground is seemingly out of control. Prices continue to spiral upward; the commodities Research Board’s general commodities index is up 38 percent for the trailing year.

What gives? The US economy isn’t exactly setting the world afire. Growth in the latest quarter was just 0.6 percent--and we were lucky to get that. Meanwhile, other spots around the world aren’t growing that much better. Most core economies in Europe are slowing down, so much so that a recent study out of Germany forecast a substantial rise in poverty rates. The report estimated that as many as 10 million Germans are headed into dire straits by end of the next decade.

One thing that isn’t going up right now is the US dollar. As we’ve discussed recently in Personal Finance and The Yield Letter, the greenback’s slip and slide against the euro, for example, has reached 14 percent during the past year.

This may explain why so much of what we consume in our daily lives keeps climbing, and why we may not be done yet.

More and more investors--and not just the high and mighty, globetrotting jetsetters--are asking, how can we protect ourselves, or maybe make a buck, by selling out of the buck?

A currency represents, essentially, the stock of a country. Right now, when it comes to the US, our stock isn’t finding many eager buyers.

But unlike a regular stock, we can’t just sell the dollar. Instead, if we’re not enthused about its prospects, the alternative is to exchange the buck for another currency. This means buying other currencies such as the euro, Australian dollar, British pound, perhaps even the Canadian dollar.

This used to be my stock-in-trade. As an international banker, I made it possible for investors to buy into other nations’ budding prosperity via their currencies, subsequently putting those currencies to work in deposits, bonds and other investments.

The dollar hasn’t been much of a friend to anybody’s portfolio. After all, even if you don’t travel abroad, the dollar’s losses against other currencies means we’re losing buying power for foreign-sourced goods and services. That’s on top of plain, old better investment opportunities in other countries.

Although this has been going on against several currencies for a while, it’s getting more focused in 2008. However, while you may be hearing about many that are moving positively against the dollar, not all of them--the loonie and the pound, for example--are that positive.

If we’re going to invest in other currencies to either keep what we have or, better, earn more over time as the dollar sags, we need to be picky.

This is the case with any market; it doesn’t matter whether we’re looking at stocks, bonds or funds. Being picky is crucial for investment success.

Within the Personal Finance portfolios, we’ve always had a heavy collection of non-US investments--stocks, bonds and funds.

My view has always been that by investing in assets of solid, expanding companies as well as bonds of similarly credentialed businesses and governments around the world, we can cash in on positive market and economic developments rather than limiting ourselves to the local US offerings from Wall Street.

One thing we need to know before we invest in other currencies and markets is that we don’t have to wake up in the middle of the night to enter our orders. The markets continue to expand beyond borders. Our ability to buy international companies is increasing on almost daily basis through the over-the-counter (OTC) market and so-called pink-sheet listings.

Such stocks trade in US dollars, but they actually represent real shares from markets in Europe, Asia or elsewhere. And as the dollar moves down or up, the price of these shares reflects the value changes. A long-time favorite, Vermilion Energy trust (TSX: VET.UN, OTC: VETMF), a Canada-based oil business that trades on the OTC market priced in US dollars, is really an investment in Canadian-dollar assets.

And for markets that tend to be less accessible for individual investors, such as foreign government or corporate bonds, I follow a core collection of closed-end bond funds in PF, including AllianceBernstein Global High Income (NYSE: AWF), BlackRock Income Opportunity (NYSE: BNA), PIMCO Strategic Global Government (NYSE: RCS), Templeton Emerging Markets (NYSE: TEI) and Western Assets Emerging Markets (NYSE: EFL). These funds hold bonds of many strategic markets and currencies outside the dollar, all easily bought on the New York Stock Exchange (NYSE).

What if we want to invest in or trade currencies directly to cash in on further woes of the US dollar?

Over the years the demand for currency trading has spawned a world of options for those who see themselves as the next George Soros (who has a new book out telling us how smart he’s been to have earned himself nearly $3 billion last year).

However, most folks seeking to play in the trillion-dollar daily market of currencies tend to end up broke and bedazzled by pips, spreads, cross-trades, leverage, margin and all sorts of stuff that’s really meant for professionals. And even those guys rarely, 51 percent, do consistently well.

That said, with the world dissing dollars, it continues to be enticing for more and more folks to enter the foreign exchange markets. You could open bank accounts in London or Zurich, and there are some US financials that also offer deposits, such as Jacksonville, Fla.-based mortgage thrift EverBank. But then you’re dealing with their rules, fees and restrictions.

Another alternative is to look at exchange traded funds (ETF) that track many of the leading tradable currencies beyond the dollar and trade on the NYSE every market day with easy-to-see bid/offer spreads and regular commissions.

We’ve done a series of articles on why ETFs represent a pile of woes and uncertainty. However, there are specific and significant between currency ETFs and stock or bond ETFs.

First, unlike a stock or bond ETF, a currency ETF doesn’t pick a basket but just one asset--a currency. We aren’t buying the mediocrity of a stock index or a pig-in-a-poke bond, just the named currency.  

We still have some intraday uncertainty over what the internal assets and liabilities of the currency ETFs may be, but we can quite easily and quickly price the ETFs against the direct currency prices in the foreign exchange markets.  

It’s a compromise, but one that’s doable. We’ve studied the market and see that the CurrencyShares ETFs tend to be priced and valued close enough to the underlying actual currencies, including the yields that are right on top of local bank deposit rates.

If you want to speculate a bit more beyond our core stock and bond holdings abroad, look to the CurrencyShares ETFs, starting with the current anti-dollar otherwise called the euro. CurrencyShares EuroTrust (NYSE: FXE) has gained 4.7 percent year to date, compared with 5.2 percent for the euro in the actual interbank currency market.

But there’s a kicker with the ETF: It earns an implied yield of the euro with a dividend rate of 3.2 percent compared to London bank-to-bank deposit rate (LIBID) of approximately 4.1 percent. The overall return so far this year for investors in the euro ETF is running close to 5.6 percent, all with little drama of foreign bank accounts and trading schemes.

EuroTrust’s peers, all managed by Rydex Investments, include Swiss Franc Trust (NYSE: FXF), Australian Dollar Trust (NYSE: FXA), British Pound Sterling Trust (NYSE: FXB), Canadian Dollar Trust (NYSE: FXC), Swedish Krona Trust (NYSE: FXS) and Mexican Peso Trust (NYSE: FXM). They’re all as easy to buy and sell as any stock in your online or regular brokerage account.

The euro has been gaining a lot of positive attention by traders not necessarily because the European Union economy is any better shape than the US, but because there are fewer alternatives post the continued integration of European currencies absorbed into the euro. This apparent dearth of options for those betting against the US dollar has led to traders turning to what are becoming currency surrogates in the commodities markets.

A currency is essentially a store of wealth or value--just like a stock is a store of ownership in a company. And more and more traders and investors have learned that raw goods--from crude oil and natural gas to corn and wheat to nickel and copper--can also be stores of value. And they, too, can be used to trade against the US dollar.

The results can be seen in the price performances in these markets. Take a look at the graphs detailing the price movements for each of these segments of energy, agricultural and industrial commodities and you’ll see similar gains against the dollar as those for the euro. In many cases the gains are greater because these commodities don’t have similar economic and financial baggage as the economies of the European Union.

Granted, they do have to eventually adhere to supply and demand. And with more of the world’s economies slowing, these goods can only soar so far. But right now, one of the major drivers is the need by more and more to trade something against the US dollar. call them hedgers or speculators, the bottom line is, if the dollar keeps slipping look for energy, agriculture commodities and metals to climb.

Over the years I’ve recommended a collection of companies, located both inside the US and around the world, that generate billions upon billions of revenues in commodities-based markets. The collection includes agriculture giants Monsanto (NYSE: MON) and Bunge (NYSE: BG), energy producers such as publicly traded partnership (PTP) Legacy Reserves (NSDQ: LGCY) and minerals-market venders such as Siemens (NYSE: SI).

But for those seeking direct participation in these commodity markets as an alternative currency investment against the dollar, we’ve vetted four index funds that trade in a manner similar to the CurrencyShares ETFs but on the American Stock Exchange (AMEX).

All four are run by Deutsche Bank (NYSE: DB) under the PowerShares moniker. They track the Frankfurt-based bank’s commodity indexes, which track the overall commodities markets, including energy, agriculture and base metals and each of the specific subgroups within the commodities space.

Our evaluation method was to trace the indexes against the prices of the underlying commodities and then compare the performances of these index funds against the commodities and the index. The results are even closer than for the currency markets.

There are some caveats in that these funds can experience price swings against spot prices for underlying commodities during rollovers every quarter and when the underlying markets increase dramatically. But over most three- to six-month timeframes, the funds’ net performances are better than the currency ETFs.

For those seeking an overall commodities play, look at Deutsche Bank Commodity Index Tracking Fund (AMEX: DBC). For those with a particular focus on agriculture, there’s Deutsche Bank Agriculture Fund (AMEX: DBA), a play on corn, wheat and beans. Industrial metals exposure, including nickel, aluminum and copper, can be had through Deutsche Bank Base Metals Fund (AMEX: DBB). On the petrol front--crude, natural gas and refined products--take a peak at Deutsche Bank Energy Fund (AMEX: DBE).

Finally, nobody knows better than I that it’s getting a whole lot more expensive to live, just as it’s getting a whole lot harder to make and keep your capital. The credit crunch is bad and getting worse. The stock market isn’t just scary, it’s flat-out terrifying. And yet, somehow, some way, with the help of a whole lot more bonds in all of our own portfolios, we’ll survive.

We’re going to have to work hard during the next several months; why not set yourself up for a celebration (or a wake, depending upon how it turns out)?

Later this year, I’ll be joined by a select number of subscribers on a cruise commencing at the Port of Miami, proceeding through the Caribbean (including one of my favorite islands, Saint Barthelemy), continuing on through the Panama Canal to Costa Rica.

This is a great opportunity to come to know firsthand what many subscribers have learned by going along with me on previous cruises: We enjoy ourselves enough to let go of at least some of the market-driven agita, and we’ll get some tax benefits to boot.

Click here for more information.

Dead Guys of the Week

Two things that have the power to soothe an upset kid--of any age--are a good cartoon and a nice ice cream cone. These two simple things in concept can do what so many greater things can’t: Bring a smile to even the grouchiest of grouches.

Ted Key knew this. Before his death at 95 years, he was responsible for the creation of memorable comics in papers and journals for decades and later for cartoon illustrations for Disney and Bullwinkle Productions. Yes, of Rocky and Bullwinkle.

But if Ted’s screen and print work didn’t work on kids, few alternatives would be better than the work of Irvine Robbins, who’s dead at 90 years.

Irv was in the ice cream shop business back in Glendale, Calif., when he got together with his brother in law Burt Baskin, who just happened to own another ice cream shop in Pasadena.

You see where this is going: Baskin Robbins, complete with its 31 flavors, was born back in 1948. My favorite combo since childhood? French vanilla on a sugar cone.

Speaking Engagements

It’s time: Vegas, baby! I’ll be heading to the desert paradise with Roger Conrad and Elliott Gue May 12-15, 2008, for the Las Vegas Money Show at Mandalay Bay.

Roger, Elliott and I will discuss infrastructure, partnerships, utilities, resources and energy, and to tell you what to buy and what to sell in 2008.

Click here or call 800-970-4355 and refer to priority code 010489 to do the “what happens here stays here” thing as our guest.

I’ll also be appearing at the following events:

·        The Wealth Expo, Miami, Fla., May 31-June 1, 2008

·        The San Francisco Money Show, Aug. 7-10, 2008

·        The Personal Finance Investment Resource Cruise, Dec. 1-12, 2008

 If you’re interested in having me or one of my cohorts address any investment or professional groups, please e-mail me at paymeweekly@kci-com.com with ideas or suggestions.

Errors/Omissions: I always welcome being called on facts, figures and commentary from readers and look forward to your feedback. I can be reached by e-mail at paymeweekly@kci-com.com.