Donald Coxe from BMO Financial Group was on CNBC with Maria yesterday talking about foreign investing; specifically why a strong currency is a good top down reason to pick a country to invest in which leads him now to Canada and Australia. He is partial to the mining stocks.
The idea of being in touch with the strength or weakness of the currency for any country you invest is something I have stressed for a long time on this site. For purposes of this post the assumption is that you don't get all your foreign exposure from one or two broad-based funds.
I would add a little more to Mr. Coxe's idea. Obviously it is impossible for anyone to cover all the bases in a short sound bite.
While there is nothing wrong with seeking investment destinations with a strong currency it might not ideal to limit yourself to such places. This is sort of an odd period because it seems like the dollar is weak against every currency so to pursue this you might need to look at different cross rates.
What I would add is to own countries with differing characteristics. I tend to think of countries with surpluses or deficits, commodity based or not, in their own world, big and obvious growth engines and so on.
It is easy right now to find Canada and Australia compelling (I have exposure to both for clients and personally) for all the reasons you already know. But the things that make them compelling are very similar. If something goes wrong with the commodity idea both countries would seem poised to be adversely effected. In this scenario if your only foreign exposure is here you will take a hit, a bigger hit than if you had several different countries with differing attributes.
I invest in and write about all sorts of countries in an effort to explore them for myself and encourage exploration beyond the UK and Japan.
10 comments:
I am trying to find a etf to invest in that represents a store of wealth other than precious metals and or oil which are too volatile for my taste. I would not mind a fund that had these two areas but not over weight, what do you all think of the DJP ETF for this purpose. also any other suggestions would be appreciated. would utility etfs fit tghe bill?
For extremely defensive wealth preservation, you might want to consider Merk Hard Currency Fund. It is committed to minimizing impact of currency debasement. The downside is there you're unlikely to see any meaningful upside since not exposed to anything likely to appreciate in real terms. And still some exposure to flucutating assets like gold. But could be a good ballast for a portion of your portfolio.
Instead of looking for a strong currency, I suggest looking for a stable one. Also, I suggest measuring a currency's value against something real (like gold) instead of against other fiat currencies.
REW, et al
Can you be specific to the process?
How does one access information on currency? Are there tickers for each one that can be charted? Are these tickers measured against the dollar or what?
Similarly, can someone share where to get information of country defecits, suprlus, etc.
Thanks.
I believe Yahoo Finance has currency info.
You can check most major currencies against gold at www.kitco.com
to 5:58 anon, i don't think utilities do the trick as store of value. commodities are inherently volatile. some of the products might be less volatile especially if the oil exposure is relatively modest but this might be the wrong space for you.
Yahoo has a decent currency page for staying remotely in touch for free; click here.
The quote format is EURUSD=X.
I've been bullish on foreign markets, specifically Canada, for some time. About a year ago, I rebalanced my portfolio, upping the percentage of foreign content from about 25% to nearly 50%.
I'm a tad skittish about the future of U.S. markets and think with business globalization, such a weighting revision is warranted.
I'm glad to see the move paying off with (AMEX: EWC), (and other foreign holdings).
In 2000, $1(CAD)=$0.63(USD) ... now it's trending toward par.
Cheers,
-stk
I am not sure that in today's interconnected world, there are still countries that would buck the trend in the event of another market meltdown such as May/June 2006.
Ulli...
Ulli,
I'm not sure that for a two month V it matters.
Anon 5:58:
I have done well with the Australian ETF, DNH for a while now. I don't own EWC, but here is an article on it:
http://www.streetauthority.com/cmnts/sp/2004/01-26-ewc.asp
It looks like his forcast was a bit off for the fund this year to say the least. But he does break down fund by it's holdings in general.
Both ETF's are somewhat weighed toward financials, but they do cover a broad base. I I would guess that only commodities have a literal "store of wealth". but as Roger pointed out, they are are volatile.
I also have DBU, Wisdom Tree's international utilities fund. It is a real yawner, but that's why I bought it. I would like a better yield from such a fund though.
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