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Currency Play
Old 07-10-2006, 10:43 PM   #1
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Currency Play

Some years ago when I knew I would be going to Europe for a while I bought German marks several months in advance and it almost paid for my whole trip as the dollar sank against it over that time.

Was thinking about the Swiss frank this time. Looks cheap compared to where it might go, if and when the dollar sinks again, as I expect it will later this year.

Or maybe the Swiss frank is not a good bet. Any thougts on this?

boont
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Re: Currency Play
Old 07-10-2006, 11:43 PM   #2
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Re: Currency Play

It's all Greek to me.
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Re: Currency Play
Old 07-12-2006, 09:43 AM   #3
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Re: Currency Play

Quote:
Originally Posted by boont
Some years ago when I knew I would be going to Europe for a while I bought German marks several months in advance and it almost paid for my whole trip as the dollar sank against it over that time.

Was thinking about the Swiss frank this time. Looks cheap compared to where it might go, if and when the dollar sinks again, as I expect it will later this year.
Just started researching this last night - nothing in depth yet, just playing with the idea after reading the difficulties of using CC's overseas and thinking on the last couple of years of dollar weakness. I'm curious about the least expensive way to buy foreign currencies in the US. I remember years ago reading something about how to do some currency speculation cheaply and on a small scale by buying foreign denominated traveler's checks.
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Re: Currency Play
Old 07-12-2006, 09:55 AM   #4
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Re: Currency Play

Quote:
Originally Posted by Leonidas
Just started researching this last night - nothing in depth yet, just playing with the idea after reading the difficulties of using CC's overseas and thinking on the last couple of years of dollar weakness.* I'm curious about the least expensive way to buy foreign currencies in the US.* I remember years ago reading something about how to do some currency speculation cheaply and on a small scale by buying foreign denominated traveler's checks.*
I have never had a problem using a CC overseas... there are some places that do not accept CCs, but usually there is someplace you can find... and of course you can always go the the ATM and withdraw money.. just remember a fee is involved in all transactions (both CC and ATM)
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Re: Currency Play
Old 07-12-2006, 09:58 AM   #5
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Re: Currency Play

Quote:
Originally Posted by Leonidas
I'm curious about the least expensive way to buy foreign currencies in the US.
You might want to investigate http://www.xe.com/

I have used them a couple of times to transfer money from here to the UK. Rate are good, service seems quite efficient. They do make you jump through a few security hoops to open an account -- but then I guess that's a good thing!

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Re: Currency Play
Old 07-12-2006, 10:12 AM   #6
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Re: Currency Play

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Originally Posted by Texas Proud
I have never had a problem using a CC overseas... there are some places that do not accept CCs, but usually there is someplace you can find... and of course you can always go the the ATM and withdraw money.. just remember a fee is involved in all transactions (both CC and ATM)
(I'm not speaking from personal experience, just what I've read recently). It depends on where you go and what CC you're using. I read on Fodor's board last night that some places are almost like the US when it comes to using a CC (the UK for example), but others places can be dicey. Diner's Club is virtually unuseable in Europe and Discover is seldom accepted. Most of the time a Visa or MC will work just fine, but in some places they don't take them - or any credit cards. There are also lots of instances where stores and restaurants want to tack on fees (currency exchange fee and/or CC use fee) that jacks up the price of the purchase.
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Re: Currency Play
Old 07-13-2006, 05:06 PM   #7
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Re: Currency Play

Quote:
Originally Posted by Leonidas
Just started researching this last night - nothing in depth yet, just playing with the idea after reading the difficulties of using CC's overseas and thinking on the last couple of years of dollar weakness.
CCs seem to offer pretty good rates as long as you don't get zinged by the bank. Mastercard / Visa charge 1%, but banks sometimes tack another 2% or more. We ended up getting a Visa card through our credit union that doesn't charge any additional fees. Also, ATM transactions seem to have pretty good rates as well, but again you have to be careful that they don't rape you with fees. Also, you'll want to make sure that they charge you in the local currency, since some places do the conversion the purchase to USD before charging your card. This means you'll get a crappy exchange rate AND be charged the foreign transaction fee!

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Re: Currency Play
Old 07-14-2006, 12:55 PM   #8
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Re: Currency Play

Money is oozing back into the Dollar today as people get nervous about some overseas investments in light of the latest "Mid-East Conflict".

Whatever is happening over there doesn't show any sign of going away any time soon. Hezbollah (sp?) is stepping up their game and while Isreal doesn't want to fight against guerillas (part of why they left Lebanon last time) they darn sure aren't going to let them toss Katushas over the border anytime they want. Is the trickle going going to the USD as a safe haven likely to grow? I'm clueless on this - anybody have any thoughts.
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Re: Currency Play
Old 07-14-2006, 01:06 PM   #9
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Re: Currency Play

I'll hazard a guess that we may see a small rally in the USD for a little while, but eventually all of the things that are shoving the USD down will re-assert themselves as market participants get used to the ME conflicts simmering away.

Translation: this is probably an opportunity to sell the USD/buy foreign currencies.
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Re: Currency Play
Old 07-14-2006, 01:10 PM   #10
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Re: Currency Play

Look at gold shooting up. Seems like people are already shunning the USD. Lots of stuff is getting cheap too as people sell off. Might be a good time to buy soon if you got the stomach for it.
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Re: Currency Play
Old 07-14-2006, 04:27 PM   #11
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Re: Currency Play

I’ve already jumped on board with Buffet’s predictions and diversified into funds held in Euro, Swiss Francs, and Canadian Dollars, as well as a multiple Asian currency CD through Everbank.

Although many on these boards call me crazy, here is the background info, along with Buffet’s predictions, as to why I am diversifying in other currencies.

Note: This is purely for information purposes, do your own due diligence and make your own conclusions.


Recently, the dollar hit an all-time low against the euro. The dollar has dropped 47.5
percent from its high six years ago and is down a whopping 93% in the last 65 years. As a
result, the U.S. current account deficit, the broadest measure of foreign trade, has risen to
nearly $600 billion, or around 6 percent of gross domestic product, as Americans buy more from overseas than U.S. businesses can export. We’ve seen the bottom dropping out of the U.S. currency for over a year now, the victim of questionable decisions on interest rates from the Federal Reserve, record high oil prices, and the uncertainty over the war in Iraq has sent the dollar on a downward spiral.

Worse, the US dollar is no longer backed by gold or silver of anything else for that matter. The only thing backing it today is the “full faith and credit” of the US government.

Yet that government now has over $8.2 trillion in outstanding debt (!) …trillions more
in “off-balance sheet” obligations (like Social Security and Medicare)…and it’s adding to its unproductive debt at the rate of more than $1 billion a day!


At the same time, foreign central banks and investors have kept the dollar
afloat over the last few years. They’ve bought nearly a quarter (23.2%) of the
national debt! But the latest currency reports show foreigners are now selling US government bonds.

As foreigners see a US twin deficit (fiscal and trade) climbing over the $1
trillion mark a year…and national debt on track to hit $10 trillion in the next
two years…their appetite for dollars (and dollar debt) is disappearing. And this is putting heavy downward pressure on the dollar.

In the last four years, it’s down 47% against the euro, 15% against the pound, 23% against the Swiss franc, and 29%, and 31% against the Canadian and Australian Dollars.

These decreases include the rallies we have seen in 2005 of 13%, 10%, 12.5% and 6.5% in the Euro, pound, Swiss franc, and Australian Dollar respectively.

With the problems of the Federal and Trade deficits (twin deficits) continuing to grow,
with no end in site, the recent strength in the dollar is most likely a short-term aberration,
setting the stage for further declines in 2006 and beyond.
But if you still think this is only a concern for currency traders and tour operators, think
again…

● Dollar devaluation in the 1930’s coincided with the biggest bear market in history.
● After the US went off the gold standard in the ‘70s, a 10-year bear market
followed.
● The Crash of ’87 was preceded by a35% devaluation of the dollar against
major currencies in the previous 18 months.


In short, the continued debasement of the US dollar will affect the value of all US investments. It could drag down US stocks, bonds and real estate in a dramatic way.
But it’s not all bad news…As the dollar falls, by definition, other
currencies and markets must rise.

I also heard on CNN about Russia, Saudi Arabia and another country (Can’t remember?) that hold a large portion of dollars, are now beginning to switch to the Euro for their reserves. Not to mention that countries are also switching to selling oil in Euro instead of the dollar and OPEC has suggested selling oil in Euro.

As much as I am a patriot of the USA, things don’t look good for the dollar but then again things and markets always have a way of surprising us.



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Re: Currency Play
Old 07-14-2006, 04:53 PM   #12
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Re: Currency Play

Quote:
Originally Posted by PsyopRanger
Although many on these boards call me crazy...
Psy, I was out of pocket for a couple of weeks after you began posting here and have not participated in any of your threads. I've done some catching up on your posts and the discussions they've generated. My conclusion is that you are not crazy.

However, you are young and apparently full of testosterone-influenced ideas that you can somehow figure out how to 'play' the market to make some real money. I don't consider that crazy, just an expensive way to get an education. But what the heck, tuition is expensive at virtually all institutions of higher learning, right?

You'll know you've walked across the stage and received your diploma once you get your tail feathers thoroughly singed.

My advice: buy index funds and a weekly lottery ticket.

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Re: Currency Play
Old 07-14-2006, 05:43 PM   #13
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Re: Currency Play

Rats!!!

1966 -2006 only forty years in the market(13th in ER) my boring balanced index Benchmark is still overall beating the crap out of my individual stocks(15% of portfolio). My rental RE over 15 yrs was ok but not spectactular. The boring stuff funded/is funding 85% of my ER - a 30 yr overnight success via DCA/auto investing max 401k/IRA and mutual funds monthly prior to 1976.

"You gotta know when to hold em, And know when to fold em" to paraphrase Kenny Rogers.

BTY - Buffett, I believe still holds Budweiser(BUD) - they sell a lot of beer overseas and take local currency. Now that's a currency play.

Hey at age 63 - maybe if I get some Viagra - a side effect might be to improve my stock picking.

!5% - never say die - it's male, hormonal and incurable. Did have some 3-5 yr stretches where I was a legend in my own mind. In the end - the boring crap is what came thru for me.

heh heh heh heh heh heh heh heh - 92 here, no wind - I'd better get out of the sun.
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Re: Currency Play
Old 07-15-2006, 02:35 AM   #14
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Re: Currency Play

I don’t think the question is whether “boring index funds” work, they do, and you all have proven it.

But why not a boring index fund held in Euro or Swiss francs, when the dollar is falling?

Plus, the market has changed a lot in the past 30 years, up until 10-15 years ago; did anyone have access to online trading, foreign mutual funds, or the option to invest in currencies easily? Maybe this would have been an option for some of you if it was available.

For those of us living in Europe and seeing first hand the daily eroding dollar, this may be more apparent then to those living in the US.

I have a DOW Index Fund which is conservative in Large Caps; the difference is it is traded in Euro, not dollars. The best case is the dollar survives and the fund goes up, the
worse case is the dollar drops more and it is hedged in Euro.

The original question was options against a falling dollar, not weather my investing style works.
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Re: Currency Play
Old 07-15-2006, 03:51 AM   #15
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Re: Currency Play

Quote:
Originally Posted by PsyopRanger
But why not a boring index fund held in Euro or Swiss francs, when the dollar is falling?* *
Well to give a smarty pants answer because when the dollar falls that's a good time to buy dollars not sell your dollars.* You are probably talking about the future though not the past.* The future is never clear.

Quote:
Plus, the market has changed a lot in the past 30 years, up until 10-15 years ago; did anyone have access to online trading, foreign mutual funds, or the option to invest in currencies easily?* Maybe this would have been an option for some of you if it was available.
All these changes that make the markets more liquid also reduce the possibility that there's inefficiencies left for people to exploit.

This is the crux of the issue for me... the currency markets are incredibly efficient at taking in predictions and data from thousands of sources, and by the miracle of the market bringing it all together to get a consensus judgement about the right values.* In fact I would say the market is probably better at valuing and predicting than almost any individual participant in the market.

Whatever public info you have access to is already priced into the market values.* If you have good info that leads you to believe a particular currency is underpriced, you can pretty well bet that someone else has good info that you didn't come across, indicating that it's overpriced.*

Then again as more and more people enter the currency market because late night infomercials say they can make a killing trading in their bathrobes, maybe there will be some inefficiencies that we'll be able to exploit*
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Re: Currency Play
Old 07-15-2006, 04:43 AM   #16
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Re: Currency Play

Quote:
Originally Posted by free4now
Well to give a smarty pants answer because when the dollar falls that's a good time to buy dollars not sell your dollars. You are probably talking about the future though not the past. The future is never clear.

All these changes that make the markets more liquid also reduce the possibility that there's inefficiencies left for people to exploit.

This is the crux of the issue for me... the currency markets are incredibly efficient at taking in predictions and data from thousands of sources, and by the miracle of the market bringing it all together to get a consensus judgement about the right values. In fact I would say the market is probably better at valuing and predicting than almost any individual participant in the market.

Whatever public info you have access to is already priced into the market values. If you have good info that leads you to believe a particular currency is underpriced, you can pretty well bet that someone else has good info that you didn't come across, indicating that it's overpriced.

Then again as more and more people enter the currency market because late night infomercials say they can make a killing trading in their bathrobes, maybe there will be some inefficiencies that we'll be able to exploit

So in your opinion, the best way to hedge against a falling dollar is to stick with the dollar, DCA, and ride it out?

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Re: Currency Play
Old 07-15-2006, 07:45 AM   #17
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Re: Currency Play

Yep

With this warning - that's me - aka the American provincial - in Missouri - with no plans to relocate oversea's. The foreign index amounts in Target and few mutinational individual stocks and I'm happy.

Now if I were not American, oversea's or planning an ex-pat lifestyle? - I have this closet admiration for the gentleman I've nicknamed 'Ben of Thailand' and 'extreme slice and dice' - 10 - 10% slices. He posts a lot over at Raddr's site and here once in a while - currently residing in Thailand.

Long ago - there was a bank in St. Louis where one could buy foriegn savings and CD's in various currencies.

Me - Still think Budwesier or Coke are a good way to hedge - there of course are many others.

More than one way to skin a cat.

heh heh heh heh heh - color me Boglehead - er ah mostly - still have a couple Aussie Platinum coins in the old safe deposit box.
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Re: Currency Play
Old 07-15-2006, 09:16 AM   #18
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Re: Currency Play

Being overseas myself (relative to the US), I agree with unclemick: buy through the dip(s). Don't try to outsmart the currency markets. Just spread your bets around widely and cost average your way through.

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Re: Currency Play
Old 07-15-2006, 09:20 AM   #19
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Re: Currency Play

Here are some rydex etfs that play with currency

FXB - British
FXC - Canadian
FXF - Swiss
FXA - Aussie
FXS = Swedish
FXM - Mexican
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Re: Currency Play
Old 07-15-2006, 09:36 AM   #20
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Re: Currency Play

I don't think it is crazy to diversify internationally. Currencies do go up and down and ours has downward pressure at the moment, for sure. IMHO, the important question is, currency fluctuations aside, do international markets have long-term returns that are as good or better than US markets?

Less Antman, friend of Andrew Tobias, likes 100% equities distributed 50/50 in US/international index funds. He claims that such a mix has never been "under water" for more than five years in a row. in the past few years that became about 5 and a half years, but the idea still holds.

http://www.simplyrich.com/board.htm

Scott Burns has his Margarita Portfolio has equal parts of Vanguard Total Stock Market Index and Vanguard Total International Index (plus an equal part of Vanguard Inflation Protected Securities):

http://tinyurl.com/z7msq

My portfolio is close to 50/50. Right now,my foreign part is in roughly equal amounts of:
Vanguard International Value,
Vanguard Emerging Markets,
Fidelity Canada Fund,
and Matthews Asian Growth & Income,
but I have been looking at others. I seem to have missed the boat on some funds but these have done well for me so far. Thinking about more Japan and India.

I had hoped that these funds would go up and down out of phase with my US funds, but over the past 3 or 4 years, they have been distressingly in-phase (although the overall return has been quite nice). Overall, up about 4% since the first of the year, 19% for past 12 months, 21% for 3 years, 10% for 10 years (before int'l diversification). Right now, everything is down. Maybe I should have 1/3 in Vanguard Inflation Protected Securities? (Or "should have had"?)

BE AWARE that many international funds are currency-hedged to try to wash-out the effect of currency fluctuations! Finding out which do and which do not hedge is a challenge, although someone has done the research for us (don't remember who--sorry). I think my int'l funds may be hedged, so what I have is a play on foreign markets only. I have bought European funds in the past when I thought the dollar was unusually strong, but no big results when it reverted to a more reasonable exchange rate.

Another couple of points to remember:
If the US economy tanks, the rest of the world will have problems, too.
Oil is bought and sold in US dollars. This creates an independent demand for the dollar. There have been attempts in the past to change this, but unsuccessful. Don't know why.

Personally, I would not try any pure plays on currencies. I like investments that pay dividends, not currencies or commodities. I buy the mine and the oil well, not the gold and the oil.

Ed
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