Page 1 of 2 12 LastLast
Results 1 to 25 of 37

Thread: A way for 'small time investors' to short the US dollar

  1. #1
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default A way for 'small time investors' to short the US dollar

    Rydex has a 2 * inverse US dollar fund ... RYWBX



    I usually don't like mutual funds but, to date, there isn't an equivalent ETF. If the US Fed announces another interest rate cut in December, it might make sense to 'hedge' your US dollar denominated investments.

  2. #2
    Veteran Member
    Joined
    Sep 2005
    Posts
    426
    Thanks
    0
    Thanked 9 Times in 9 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Quote Originally Posted by Melonie View Post
    Rydex has a 2 * inverse US dollar fund ... RYWBX



    I usually don't like mutual funds but, to date, there isn't an equivalent ETF. If the US Fed announces another interest rate cut in December, it might make sense to 'hedge' your US dollar denominated investments.
    Unless you are planning to take a foreign trip, Why would anyone want to hedge against a falling US dollar?

    Half Knowledge is always dangerous.

    Do you know if Currency traders have already priced this information?
    Do you know the probability of a World Recession?
    Do you know the probability of other countries cutting interest rates?
    Do you know exactly when to pull out of this investment?
    Do you understand all the events that move a currency in either direction? (Interest rates, Supply and Demand, Flight to Safety/Quality, Credibility of Foreign Capital Markets etc.)
    Do you know the probability of the World realizing the US Dollar is still the safest bet?

    If you don't know the questions to all of these, you may not only incur transactions costs but may have negative returns.

  3. #3
    Veteran Member StuartL's Avatar
    Joined
    Feb 2006
    Location
    European Man Of Mystery
    Posts
    648
    Thanks
    1
    Thanked 21 Times in 7 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Do you know the probability of the World realizing the US Dollar is still the safest bet?

    Sorry - not exactly ... but it ain't high!

  4. #4
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A way for 'small time investors' to short the US dollar

    If you don't know the questions to all of these, you may not only incur transactions costs but may have negative returns.
    you may want to consider the fact that sitting still and doing nothing will, by itself, result in negative returns if the US dollar continues to fall !

  5. #5
    Veteran Member
    Joined
    Sep 2005
    Posts
    426
    Thanks
    0
    Thanked 9 Times in 9 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Quote Originally Posted by Melonie View Post
    you may want to consider the fact that sitting still and doing nothing will, by itself, result in negative returns if the US dollar continues to fall !

    US Dollar itself can only rise or fall w.r.t to something else. It can't fall on absolute terms. For an average Joe a falling US dollar shouldn't matter.

    Hedging like insurance is a suckers bet and should only be used by someone who has thousands of dollars exposed to a single asset susceptible to currency fluctuation

    An Average Joe who buys a basket of goods from various countries, these things cancel out and it shouldn't matter in the long run.

    If you are earning in dollars, you pay $250 for a Wii, $399 for a PS3 and $349 for an XBOX irrespective of where the currency will trade at

    The only thing an Average Joe should be worried about is CPI(Inflation). Inflation measures all the secondary effects that you allude to.

  6. #6
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A way for 'small time investors' to short the US dollar

    US Dollar itself can only rise or fall w.r.t to something else. It can't fall on absolute terms. For an average Joe a falling US dollar shouldn't matter.
    this would be true if Joe Sixpack never needed to buy anything that is priced as a global commodity such that the price is set by global demand + a 'basket' of currencies. Unfortunately, gasoline / food / energy / metals and other raw materials used to build everything are global commodities.

    this would be true if Joe Sixpack never needed to buy anything that is manufactured / processed outside of the USA such that the labor cost content embedded in the US dollar price is denominated in a foreign currency. Unfortunately, damn near every manufactured product for sale in America these days and every (outsourced) service provided to Americans these days has a huge amount of foreign labor content.

    It is arguable that (US dollar price) inflation is actually nothing but foreign currency exchange rate losses coming home to roost in the vast majority of cases (i.e. anything that doesn't have 100% domestic content). CPI does not measure this in any realistic way ... a point already well documented in other threads.

    An Average Joe who buys a basket of goods from various countries, these things cancel out and it shouldn't matter in the long run.
    no way when the US dollar exchange rate is falling versus ALL other major currencies !!!

    f you are earning in dollars, you pay $250 for a Wii, $399 for a PS3 and $349 for an XBOX irrespective of where the currency will trade at
    not for long you won't, because if the foreign manufacturer has fixed costs of production (denominated in Yen or Yuan in this case), and is collecting fewer and fewer equivalent Yen or Yuan when the fixed US dollar prices paid by US consumers are repatriated and booked as corporate sales in Yen or Yuan, then the foreign manufacturer's profit margin shrinks. So far foreign manufacturers have been 'eating' a portion of exchange rate losses via accepting smaller profit margins.

    But eventually, if the US dollar exchange keeps dropping and US dollar prices for US consumers remain the same, those foreign manufacturer's profit margins will disappear altogether - which will then either result in higher US dollar denominated prices or pulling these products from US retailer shelves. This is already an issue with corporate profits shrinking / stock price declines for companies such as Porsche / Honda / Toyota - and rest assured that their stockholders will not allow this trend to continue forever.

    ~
    Last edited by Melonie; 11-28-2007 at 12:38 PM.

  7. #7
    Veteran Member
    Joined
    Sep 2005
    Posts
    426
    Thanks
    0
    Thanked 9 Times in 9 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Quote Originally Posted by Melonie View Post
    this would be true if Joe Sixpack never needed to buy anything that is priced as a global commodity such that the price is set by global demand + a 'basket' of currencies. Unfortunately, gasoline / food / energy / metals and other raw materials used to build everything are global commodities.

    no way when the US dollar exchange rate is falling versus ALL other major currencies !!!

    ~
    All these are captured by CPI. Why would you double count things?

    Your biggest future spending are
    i) Buying a House
    ii) College Education for your children
    iii) Medical expenses

    It means diddly-squat to the costs of these things whether US $ appreciates or depreciates.

    I repeat. Average Joe shouldn't really worry about Dollar depreciation.

    Unless you are a sophisticated currency exchange trader, you have no way of knowing how exchange rates will go

    Finally, Investing is about buying assets. Currency is not an asset, but a speculative instrument.
    If you are a speculator
    i) In the long run you don't beat S&P
    ii) You can't sleep well at night

  8. #8
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A way for 'small time investors' to short the US dollar

    Your biggest future spending are
    i) Buying a House
    ii) College Education for your children
    iii) Medical expenses

    It means diddly-squat to the costs of these things whether US $ appreciates or depreciates.
    again you ignore my previous comments !

    In regard to the cost of a house, in case you hadn't noticed the asphalt shingles, copper piping and wiring, plastics and (energy intensive) processed wood are all tied to the pricing of global commodities. Despite the fact that new US homebuilding is 'on it's a$$ in terms of new demand, the prices of all of these basic materials is still far higher than they were 5 years ago. So while there may be some deflationary bargain-hunting possible in regard to the value of the 'dirt' under homes in particular locations, on the average there is a fair amount of correlation between the US dollar weakening 33% over the past 5 years and the prices of new homes increasing 33% while Joe Sixpack's paycheck remained essentially the same.

    BTW college costs are also up nearly 33% over the past 5 years, by pure coincidence of course. Not - energy costs are a major component of operating a college. Medical costs are also up nearly 33% over the past 5 years, again by pure coincidence of course. Not - that new MRI scanner is based on the cost of huge copper wound electromagnet coils manufactured in Japan.

    Unless you are a sophisticated currency exchange trader, you have no way of knowing how exchange rates will go
    you don't need to be a sophisticated currency exchange trader to know that a country that spends far more money than it earns, whose financial regulatory body is regularly cutting interest rates, and whose financial regulatory body prints up new money at a rate of something like 14% per annum in order to pay for that additional spending, is highly unlikely to have a RISING currency exchange rate !

    Case in point, the Fed injected 43 Billion freshly printed dollars today via TOMO's. The US stock markets took a big upward leap as a result. Now watch the overnight US dollar exchange rate drop !

    I repeat. Average Joe shouldn't really worry about Dollar depreciation.
    again, this is 'classic wisdom' that was true in the 1950's, when most of America's oil was pumped in Texas, when GE built television sets in New York, and when Volkswagen only imported a few hundred cars a year into the US. This was arguably still true as a matter of degree up through the 1980's. However, as the US economy became increasingly globalized in the 1990's, the effect of the US dollar's exchange rate became a larger and larger factor in everything that Joe Sixpack wants and needs, as more and more of America's commodity demand had to be supplied from overseas sources, and as manufactured products sold in America were increasingly produced overseas with foreign labor instead of produced domestically with domestic labor.

    Granted this development was somewhat disguised by the relatively stable US dollar exchange rate that existed for many years prior to the 9/11 attacks. But after that point, the increased instability in the US dollar exchange rate quickly translated into an effect on US dollar denominated prices of all items with significant global content.

    ~
    Last edited by Melonie; 11-28-2007 at 05:21 PM.

  9. #9
    Banned Katrine's Avatar
    Joined
    Nov 2003
    Posts
    13,855
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Thanks Mel, that was a great breakdown of the effects of globalization to our economy! And although I am a bit more optimistic about the future, those factors are very much at play in our present reality.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

  10. #10
    Veteran Member
    Joined
    Sep 2005
    Posts
    426
    Thanks
    0
    Thanked 9 Times in 9 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Quote Originally Posted by Melonie View Post
    again you ignore my previous comments !

    In regard to the cost of a house, in case you hadn't noticed the asphalt shingles, copper piping and wiring, plastics and (energy intensive) processed wood are all tied to the pricing of global commodities. Despite the fact that new US homebuilding is 'on it's a$$ in terms of new demand, the prices of all of these basic materials is still far higher than they were 5 years ago. So while there may be some deflationary bargain-hunting possible in regard to the value of the 'dirt' under homes in particular locations, on the average there is a fair amount of correlation between the US dollar weakening 33% over the past 5 years and the prices of new homes increasing 33% while Joe Sixpack's paycheck remained essentially the same.

    BTW college costs are also up nearly 33% over the past 5 years, by pure coincidence of course. Not - energy costs are a major component of operating a college. Medical costs are also up nearly 33% over the past 5 years, again by pure coincidence of course. Not - that new MRI scanner is based on the cost of huge copper wound electromagnet coils manufactured in Japan.



    you don't need to be a sophisticated currency exchange trader to know that a country that spends far more money than it earns, whose financial regulatory body is regularly cutting interest rates, and whose financial regulatory body prints up new money at a rate of something like 14% per annum in order to pay for that additional spending, is highly unlikely to have a RISING currency exchange rate !

    Case in point, the Fed injected 43 Billion freshly printed dollars today via TOMO's. The US stock markets took a big upward leap as a result. Now watch the overnight US dollar exchange rate drop !



    again, this is 'classic wisdom' that was true in the 1950's, when most of America's oil was pumped in Texas, when GE built television sets in New York, and when Volkswagen only imported a few hundred cars a year into the US. This was arguably still true as a matter of degree up through the 1980's. However, as the US economy became increasingly globalized in the 1990's, the effect of the US dollar's exchange rate became a larger and larger factor in everything that Joe Sixpack wants and needs, as more and more of America's commodity demand had to be supplied from overseas sources, and as manufactured products sold in America were increasingly produced overseas with foreign labor instead of produced domestically with domestic labor.

    Granted this development was somewhat disguised by the relatively stable US dollar exchange rate that existed for many years prior to the 9/11 attacks. But after that point, the increased instability in the US dollar exchange rate quickly translated into an effect on US dollar denominated prices of all items with significant global content.

    ~
    Melonie, those are really flawed arguments.

    According to your logic, If Dollar gains against currencies
    i) our College Costs will go down?
    ii) our medical expenses will go down?
    iii) Real Estate will go down?

    The biggest flaw in your argument is you don't know how much effect each one has on the other.

    PS3 cost $499 a year before.
    Despite $ dropping a whopping 25%, PS3 costs $399. How do you explain that?

    Anyway the main point of this thread is "Whether Average Joe should hedge against dollar by investing in the instrument that you showed"

    The answer is an emphatic and overwhelming "NO". Average Joes and currency trading should never be in the same sentence. It is a suckers bet. Currencies go up and down.

    You have no clue about the kind of skeletons that are hidden in the foreign capital closets. Instead of digging skeletons in the US economy, If you spend 1% of your time digging behind European/Asian countries economy you'll immediately find why the $ slide is a temporary thing.

  11. #11
    God/dess
    Joined
    Sep 2006
    Posts
    7,964
    Thanks
    6,155
    Thanked 10,183 Times in 4,602 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    I doubt foreign countries will let the dollar fall much lower. Airbus' chief executive has said that the Dollar's new lows against the Euro are life-threatening.

  12. #12
    Veteran Member StuartL's Avatar
    Joined
    Feb 2006
    Location
    European Man Of Mystery
    Posts
    648
    Thanks
    1
    Thanked 21 Times in 7 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Quote Originally Posted by eagle2 View Post
    I doubt foreign countries will let the dollar fall much lower. Airbus' chief executive has said that the Dollar's new lows against the Euro are life-threatening.
    Well you have a point. There are many that will be adversly impacted by a sliding dollar. However, there are other nations which are doing all they can to deliberately destabilise it. The best examples are Iran and Venzuela. Though they might not be massive economies in the grand scheme of things, they are oil and gas producing nations. As they try ever harder to trade in currencies other than the US$, they give other nations a diversification option out of their falling petro-dollars.

    I think much of the above thread - and other recent similar threads by xanfiles1 -can be summed up with the idea that either you do or you don't interest yourself in geopolitics - aka the great game.

    Clearly, many of us in the Dollar Den take great interest in how the political scene impacts our money - and others do not. I think that goes to the core of many of the recent disagreements.

    Best wishes everyone,

    Stuart

  13. #13
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A way for 'small time investors' to short the US dollar

    PS3 cost $499 a year before.
    Despite $ dropping a whopping 25%, PS3 costs $399. How do you explain that?
    I-Phone marketing strategy. When product is brand new and in temporary short supply, set the price high and let the 'must have' devoted customers pay through the nose. Then after production gets up to speed drop the price to attract a wider customer base. Electronics have a short life cycle ...

    I doubt foreign countries will let the dollar fall much lower. Airbus' chief executive has said that the Dollar's new lows against the Euro are life-threatening.
    you're 90% correct about the Europeans (the missing 10% is the ECB's commitment to fighting inflation even if it kills business profits in Europe). However, the Chinese may not give two s#!ts whether the European economy is trashed along with the US economy, and they have over a trillion dollars worth of US dollar foreign exchange reserves to play the exchange rate game with !!


    According to your logic, If Dollar gains against currencies
    i) our College Costs will go down?
    ii) our medical expenses will go down?
    iii) Real Estate will go down?
    i) the cost of OPERATING a college will go down ... as to whether the lower energy costs are passed on to students or not is another matter
    ii) the cost of OPERATING a medical facility and purchasing new high tech medical equipment will go down - but same issue as above
    iii) the cost of CONSTRUCTION MATERIALS for new houses will go down - same issue as above

    Again the US dollar price paid = cost of materials + cost of labor + profit margin. Thus if the cost of materials and/or labor are denominated in a foreign currency and/or the cost of labor is denominated in a foreign currency, two variables remain ... the US dollar price and the profit margin pocketed by the manufacturer / service provider.

  14. #14
    Veteran Member
    Joined
    Sep 2005
    Posts
    426
    Thanks
    0
    Thanked 9 Times in 9 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Quote Originally Posted by StuartL View Post
    I think much of the above thread - and other recent similar threads by xanfiles1 -can be summed up with the idea that either you do or you don't interest yourself in geopolitics - aka the great game.

    Stuart
    Aha trying to understand the uncertain world. Come back to me after understanding all the geopolitics of the whole world and come to this brilliant conclusion

    'The best long term investment is putting your money monthly in a basket of World500 stocks'

    The problem with understanding geopolitics around the world is now you would be dangerously armed with half-knowledge. You'll come up with a model filled with human biases. There are millions of variables at play and any moment you could be hit by a black swan event. If you think you are smart enough to keep track of all those variables and the interplay between them kudos to you.

    http://en.wikipedia.org/wiki/Fooled_by_randomness
    http://en.wikipedia.org/wiki/The_Black_Swan_%28book%29

    Human beings:

    i) overestimate causality, e.g., we see Moses in the clouds instead of understanding that there are just random clouds that appear to our eyes as Moses (or something else);
    ii) tend to view the world as more explainable than it really is, i.e., we look for explanations even when there are none.

  15. #15
    Veteran Member
    Joined
    Sep 2005
    Posts
    426
    Thanks
    0
    Thanked 9 Times in 9 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Quote Originally Posted by Melonie View Post
    Case in point, the Fed injected 43 Billion freshly printed dollars today via TOMO's. The US stock markets took a big upward leap as a result. Now watch the overnight US dollar exchange rate drop !

    ~
    Actually the Euro dropped much further after your post. The post was not to highlight your error in prediction, but to highlight the most important point about investing

    * Nobody can predict short term movements
    * That only leaves us with long term horizons. 90 Years of data have shown that more than 95% of people (including experts in various asset classes) cannot systematically beat a World500 Index of stocks

    You should start with the above universal truths and invest. As you read thousands of posts and blogs, always check with the above truths.

    As somebody else said, a guy can pick a dancer in a Strip Club, but the odds are stacked heavily against you.

    You will always hear stories of people who made money in Currencies, Gold, Real Estate, Las Vegas, Lottery, but you are taking a huge risk chasing that dream. The top 1%ile in any field are passionate enough to develop great intuitions and they will make above average returns. But, believe me you can never replicate their intuitions by reading a couple of blogs

    Melonie, I have no doubts that you are in that top 1%ile. But, it is almost impossible to pass your wisdom to others who have only passing interest in the topics that you post. It is just not possible.

  16. #16
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A way for 'small time investors' to short the US dollar

    You will always hear stories of people who made money in Currencies, Gold, Real Estate, Las Vegas, Lottery, but you are taking a huge risk chasing that dream. The top 1%ile in any field are passionate enough to develop great intuitions and they will make above average returns. But, believe me you can never replicate their intuitions by reading a couple of blogs

    Melonie, I have no doubts that you are in that top 1%ile. But, it is almost impossible to pass your wisdom to others who have only passing interest in the topics that you post. It is just not possible.
    I would argue that you are overly generous in placing me in the top 1%. If I was a 1%er, I would already be living in a beachfront McMansion on the isle of Malta when not busy partying on on my private yacht LOL. Perhaps I fall in the top 25%. As you and other have made reference to in previous posts, a LOT of investment successes are not the result of analysis or deep understanding of global economic relationships, but in fact are the result of hearing particular tidbits of specific information and acting on them before that information becomes general public knowledge.

    As far as my ability to communicate investing insights to dancers who only have a 'passing interest' in investments, you're probably correct in the vast majority of cases. However, the girls that frequent SW do not represent a typical cross-section of dancers by any means ... therefore there are more than a few that are benefitting from some of the investment issues discussed in Dollar Den.
    '
    As to the US dollar turning around unexpectedly, IMHO you can chalk that up to the E*Trade 2.5 billion cash for 17% of the company buy-in deal with Citadel hedge fund investors a.k.a. a Citibank clone deal. This appears to be turning into a trend after everybody saw how well the Citibank deal was able to reduce Citi's capital problems with the involuntary help of the US taxpayer. I am told that this deal structure is the handiwork of Robert Rubin, who certainly knows the ins and outs of both the private and Fed / gov't sides of the fence. The money behind the Citadel buy-in could be Arab petrodollars or Chinese dollars or who the hell knows ... they're a hedge fund that has very limited disclosure obligations.

    Of course the mainstream financial media is explaining the dollar's unexpected rebound as a 'flight to safety' precipitated by large 'subprime' loss worries in Europe (seeing as how European banks were apparently the source of most of the 'wholesale' funds US mortgage lenders used to make 'subprime' loans to American homeowners).

  17. #17
    Featured Member
    Joined
    Nov 2006
    Posts
    950
    Thanks
    1
    Thanked 651 Times in 272 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    PowerShares DB US Dollar Index Bearish Fund (UDN) is an ETF. Expense ratio 0.50%. Aren't we supposed to have a rally in the dollar, before the dollar heads even lower?

  18. #18
    Banned Katrine's Avatar
    Joined
    Nov 2003
    Posts
    13,855
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Quote Originally Posted by Adelina View Post
    PowerShares DB US Dollar Index Bearish Fund (UDN) is an ETF. Expense ratio 0.50%. Aren't we supposed to have a rally in the dollar, before the dollar heads even lower?
    Oooh, my likey this guy. I'm putting a few clients in it that are hell bent on getting into the currency side.

    Also, in response to xanfiles...most financial professionals, and knowledgeable investors such as Melonie would not suggest that "average Joe" play with currency hedges and commodity futures, etc..

    However, in light of "World500", it might be a reasonable recommendation to further diversify into some additional specific sectors and assets classes. If "Joes" wants to be sophisticated, or pay me, he can use some simple derivities to hedge his downside risk.

    Xan, I think you have a piece of the puzzle, not the entire thing. "Asset Allocation Investor" is a great book. However its not the financial bible.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

  19. #19
    Veteran Member
    Joined
    Sep 2005
    Posts
    426
    Thanks
    0
    Thanked 9 Times in 9 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Quote Originally Posted by Katrine View Post
    Oooh, my likey this guy. I'm putting a few clients in it that are hell bent on getting into the currency side.

    Also, in response to xanfiles...most financial professionals, and knowledgeable investors such as Melonie would not suggest that "average Joe" play with currency hedges and commodity futures, etc..

    However, in light of "World500", it might be a reasonable recommendation to further diversify into some additional specific sectors and assets classes. If "Joes" wants to be sophisticated, or pay me, he can use some simple derivities to hedge his downside risk.

    Xan, I think you have a piece of the puzzle, not the entire thing. "Asset Allocation Investor" is a great book. However its not the financial bible.
    Hedging is a suckers bet. You only hedge your large single asset positions (like your home insurance). You don't hedge your diversified portfolio.

    And the piece of the puzzle of came after learning currencies, options, derivatives, VIX, Black-Scholes, Commodities.

    Bottomline, Financial models are based on Guassian assumptions (Normal Distributions) while the real world works in Mandelbrot (Fractals). That is also the reason why after years of posting double digit gains, hedge funds take a massive loss and underperform S&P 500.

    The only strategy that has stood the test of time is a diversified portfolio of stocks, because there is an underlying law of gravity rule that holds everything together

    "You can't make more money than the market"

    Any strategy you come up will never stand the test of time especially an investors horizon of 30 years.

  20. #20
    Banned Katrine's Avatar
    Joined
    Nov 2003
    Posts
    13,855
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    S&P is down this year. S&P returned less than 7% over the last 10 years. A diversified portfolio that includes various sectors and asset classes, including commodities, fares much better. Globalization and technology is changing things too quickly for 30 years to be relevant.

    And how are most investors using a 30 year time horizon? Out of all of mine, only a portion are young enough to where they have no need to access their nest egg for that long.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

  21. #21
    God/dess
    Joined
    Sep 2006
    Posts
    7,964
    Thanks
    6,155
    Thanked 10,183 Times in 4,602 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Quote Originally Posted by Melonie View Post
    However, the Chinese may not give two s#!ts whether the European economy is trashed along with the US economy, and they have over a trillion dollars worth of US dollar foreign exchange reserves to play the exchange rate game with !!
    Wouldn't this also hurt China since so much of their economy is dependent on exports to the U.S. and Europe?

  22. #22
    God/dess
    Joined
    Sep 2006
    Posts
    7,964
    Thanks
    6,155
    Thanked 10,183 Times in 4,602 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Quote Originally Posted by Katrine View Post
    S&P is down this year.
    S&P is up this year. On 1/3/07 it was at 1416.60 and today it closed at 1469.72.

  23. #23
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A way for 'small time investors' to short the US dollar

    Wouldn't this also hurt China since so much of their economy is dependent on exports to the U.S. and Europe?
    short and simplified answer is yes. But a more realistic answer is that the Chinese powers that be may choose to 'hurt' their citizens in the short term in order to accomplish a strategic objective in the longer term. This is arguably the case with the Japanese yen being kept weak and Japanese interest rates being kept near zero for the past decade. And in China's case there's an additional factor ... that corporate investor losses will for the most part involve foreign investors not Chinese investors (other than the Chinese gov't itself ... but with a trillion + in trade surplus foreign currency reserves they can afford it).

    S&P is up this year. On 1/3/07 it was at 1416.60 and today it closed at 1469.72
    actually, to truly be considered 'up' for the year, any index denominated in US dollars must provide a return that exceeds the US dollar inflation rate - otherwise the investor has 'lost' in purchasing power even though the raw numbers may be up a bit.

  24. #24
    Banned Katrine's Avatar
    Joined
    Nov 2003
    Posts
    13,855
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: A way for 'small time investors' to short the US dollar

    Quote Originally Posted by eagle2 View Post
    S&P is up this year. On 1/3/07 it was at 1416.60 and today it closed at 1469.72.
    It was down, now its up, then its down. The S&P is only relevant to me when I use it as a benchmark against my other portfolios to show how truly irrelevant it really is.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

  25. #25
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: A way for 'small time investors' to short the US dollar

    also, there's a BIG difference in return between a 2X fund and a 1X fund



Page 1 of 2 12 LastLast

Similar Threads

  1. Replies: 3
    Last Post: 07-23-2008, 03:58 AM
  2. Short Time Only: $$magnet
    By $$$magnet in forum Picture Post
    Replies: 14
    Last Post: 02-19-2008, 10:50 PM
  3. My son turned 16! (Pics for a short time (-:)
    By MsQwerty in forum Picture Post
    Replies: 30
    Last Post: 12-08-2007, 11:16 PM
  4. For a short time only: hula hoop stripping.
    By aussiepunkshocker in forum Picture Post
    Replies: 20
    Last Post: 06-29-2007, 08:44 PM
  5. short/small breasts/ whats your opinion of me??
    By ERchik05 in forum Newbie Board
    Replies: 21
    Last Post: 05-16-2005, 05:15 AM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •