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Opportunities in the foreign currency exchange rate.
Old 10-13-2008, 10:57 AM   #1
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Opportunities in the foreign currency exchange rate.

I have never been a great fan of investing in the stock market. Maybe because my father was a stock broker who was on the verge of getting rich, but died a pauper. Or maybe it is because my analysis about stock always turns out to be wrong.

I did make a lot of money in real estate as rental units - as spelled out in the book "Rich Dad, Poor Dad". But it will be some time (ie, years) before money can be made in the real estate market.

However, if you are looking to live in a foreign country when you retire, now is an excellent time to buy real estate in countries where the dollar exchange rate has skyrocketed. One example is Australia, where the value of the AUS$ has fallen almost 40%.

The dollar has never been stronger in many countries through out the globe. It is also a great time for Americans to travel - Europe being one example.

For anyone who has any investment plans involving a foreign country and spending some significant amount of money, now is a great time to take advantage of the favorable exchange rates.
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Old 10-13-2008, 11:20 AM   #2
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I agree on the travel aspects.
On the investing front it still is a bit early.

The dollar should get stronger - interest rates are now not in sync.
The US Fed rate was lower than others - dollar weak
The others will be lowing their interest rates - dollar gets strong
The recession will end in the USA first - fed will raise rate - dollar gets stronger because the others will not at the same time as the US - they don't want to risk derailing their recovery.
Buy the euro when it is close to parity with the dollar - they will begin to raise rates - and the dollar rates will remain constant.

The A$ is also heavily influenced by commodity prices - down - weak A$, up strong A$

I plan to average into the euro, A$ and possibly the UK pound - I'm watching now but I think the dollar will strenghten more.
What's good about the A$ is that the interest rate is usually a bit more than the US$ so that helps.
I usually do long term trades.
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Old 10-13-2008, 11:32 AM   #3
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I plan to average into the euro, A$ and possibly the UK pound - I'm watching now but I think the dollar will strenghten more.
What's good about the A$ is that the interest rate is usually a bit more than the US$ so that helps.
I usually do long term trades.
What firms or vehicles do you use to buy these currencies?
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Old 10-13-2008, 12:11 PM   #4
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Old 10-13-2008, 02:13 PM   #5
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Old 10-13-2008, 10:03 PM   #6
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The Australian dollar has not fallen 40% relative to the U.S. dollar. Far from it. And if you think the U.S. dollar "has never been stronger" (loosely speaking), then you are delusional. Or did you mean relative to Zimbabwe?

At least the U.S. dollar isn't flat on its back, though I'd hardly be rushing to buy overseas property just yet.

Bottom line: FX is gambling such as those merely in the U.S. stock markets have never imagined.

Cheers.
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Old 10-13-2008, 11:53 PM   #7
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Grep, not sure how you are doing your calculations but the AUD was 98 cents in July and as at last Friday was down as low as 64 cents. It did recover to 70 cents this week, most of this recovery was due to the Australian government announcing that it would guarantee all deposits in Australian banks for the next 3 years. Prior to this, the maximum was $20k. Basically I do not believe it was as much the USD strengthening as it has been the Aussie $ weakening.

I agree Australian $ is heavily influenced by commodities. However, what you have to remember is the performance of the Australian market is heavily linked to what goes on in the US.

Interest rates for borrowing and deposits have always been higher than in the US as long as I can remember. Last Monday I managed to get a term deposit in Australia for 12 months at 7.2%. By Tuesday it had dropped to 6.3% and today it's at 5.8%. However, I can qualify for 6% in my regular savings just by keeping a balance of $100k. The fall is linked to the 1% cut by the Federal Reserve in lending rates. Many of the banks this week passed on cuts of 1.6% in home loans to consumer under great pressure from the government. We used this opportunity to transfer a lot of USD to AUD.

If you are interested in buying Aussie dollars it is possible for you to go direct to the banks after you have established identity.

We also have a position in pound sterling, however we do that through our bank in the UK. When we first moved to the US in 1998 the transfer rate was something like 1.5 USD to the pound.
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Old 10-14-2008, 12:39 AM   #8
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Dangermouse,

The last time I looked at the Au$ was a bit over a week ago, and it was somewhat over $0.80 at the time. If it is truly that low now, then I stand corrected. It also means I was lucky, since I exchanged a chunk of change (from Au to US) at that time. Pure luck.

Cheers.
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Old 10-14-2008, 07:54 AM   #9
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Just to make it clear, the purpose for my post was not to suggest a good currency trade on the Forex - I am no good at playing those markets anyway.

I said if you planned on moving to any foreign country when you retire, this is a good time to buy some real estate in the area where you want to make your future home. I see that the dollar has gained about 10% on the Thai Bhat, Malaysian Ringgit, and the Philippine Peso. These are all pleasant, relatively inexpensive places to retire - especially if you are single and looking for a young, attractive spouse. I just met a man whose father retired in the Philippines. He is now 78 years old, and has a 5 year old son from his third Philippine wife!! Plus, the young son will receive a support payment of about $900 per month from Social Security until the kid is 18 years old. That's a lot of money in the Philippines

BTW, I think dex has made a good analysis. The world's financial turmoil appears to be more dire than the US - so I would not be surprised if the dollar gets even stronger against other currencies in the future.
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Old 10-14-2008, 08:18 AM   #10
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I get a lot of my dog and cat medications from an Australian place. Might be a good time to stock up on what doesn't expire soon. Last time I bought the A$ was about 90 cents US.
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Old 10-14-2008, 11:19 AM   #11
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Dangermouse,

The last time I looked at the Au$ was a bit over a week ago, and it was somewhat over $0.80 at the time. If it is truly that low now, then I stand corrected. It also means I was lucky, since I exchanged a chunk of change (from Au to US) at that time. Pure luck.

Cheers.
Don't you love it when you do something and without any great intent it turns out to have been the best decision you could have done.
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Old 10-15-2008, 12:33 AM   #12
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Don't you love it when you do something and without any great intent it turns out to have been the best decision you could have done.
Reminds me of a quote from Rod McKuen, "Remember the good times and save them for the times when things are not so good." Great philosophy to live by.
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Old 10-15-2008, 07:42 AM   #13
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