Uh Herb, that means very money.So a lot of comments to catch up on.
ETFguy doesn't get currency trading relative to buy and hold. He asks if the currencies aren't just range bound. In early 1990 it took 160 yen to buy $1. Five years later it cut in half to 80. In 1998 it was back up to 145. In early 2002 it took 135 yen to buy $1. Today it is 116 yen to buy $1. The issue, if there will be one is that the dollar could get much weaker. Some currency exposure spares some of that decline. This either appeals to you or it doesn't but that is the concept.
Kennycan notes that after inflation the market was a loser from 1966-1981. Buy, hold and never open the statement, yes. However the market was far from going nowhere. There were seven years in that period where market moved (up or down) by 15% or more. Five of those seven were moves of 20% or more. IMO going nowhere misses the boat.
One reader asked about the Rydex currency funds (RYSBX and RYWBX). These funds allow participation with the movement (or inverse) of the Dollar Index. The Dollar Index is heavily weighted in yen and euros which both have their respective issues. My intention is to try to isolate currencies that show potential for stability (so strength vs. the dollar). Both the euro and the yen are not high on my list for this. The leverage offered is compelling though for people looking to be a little more aggressive.
6 comments:
Buffet is giving up on trying to bet on currencies and investing in foriegn equities instead. It seems that Buffet could not time currency trading.
I have to agree that trading currencies is very difficult and that picking good foriegn equity funds is superior for most investors
Swiss franc
Question: does investing in an ADR of a foreign company like BHP or NVS provide you a hedge against a falling dollar?
(This currency stuff is a bit over my head).
If Sweden's Alliance Party wins next month's elections and privatizes state-owned companies, will it help or hurt the Krona?
People who were younger and investing savings year to year got the advantage of dollar cost averaging over the 66-81 period. So they did ok. But most people during that time could not take advantage of the ups and downs because they did not have the information, know-how and/or time to study the market and move in and out. Granted nowadays things have changed. I think overall, mkt participants are more sophisticated, tech has given the the info and to some extent they have found the time. But is the avg investor today really in that much of a better position to time the ups and downs of a 15 year do nothing mkt? Perhaps, but I'm sceptical. Plus the 66-81 period had diff demographics. That means that a whole lot of baby boomers are not going to get the returns they need to retire at the level of income and/or the time of their choosing.
So I can understand your comments and I beleive truly good stock pickers and/or decent market traders can do well in today's environment. However, the avg baby boomer looks to me to be staring at a pretty difficult time ahead.
I think this has political and social implications beyond just the markets as well.
IMO the current period will probably be a lot more like 1932 (= 2002) to 196x rather than the 196x-1982 bear market. This is based on us being in a comparable phase of the Kondratieff Cycle. In other words we are likely to have a bull market in the coming decade or two, but it will be weaker than the 1982-2000 bull market.
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