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Old 08-16-2015, 02:42 PM   #41
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... And right now we should probably load up on underperforming assets like Emerging Markets and Oil. (That means add to positions in those areas)

There's still a thing called a "value trap". You buy what you think is a bargain based on P/E or book value or whatever, then sit on it for years without making any money, or in the worst case even lose more or all of it. Even for stocks that we "know" cannot go to zero and will turn around some days, getting in too early and you will be underperforming the market. And that means a failed stock pick, no matter how you spin it.
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Old 08-16-2015, 03:50 PM   #42
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I click on this thread and think: "What is wrong with OP, this post doesn't make sense." Then I notice it is from 2009. Oh!

USD value is always a plus/minus, depending on your situation. As a US Citizen touring abroad, it is "whoo hoo" right now. But if I were an exporter, I might be crying.

I was reading about the yuan, and how this may affect production of Mercedes in the USA. A lot of US build Mercedes are exported to China. This may throw a wrench in the works.
Lol got that right. I just got back from over seas. I was a very happy camper

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Old 08-16-2015, 07:25 PM   #43
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Value of USD has been in decline for years... Anything coming from the outside the country ends up costing more. Just as an example, USD was worth about 120 yen / dollar in 2004 and now it hovers around 95 yen / dollar. When I went to Canada in 2001, everything seemed really cheap, but now Canadians are traveling to US to shop. I guess it doesn't hurt you directly as much if you never have to wire/transfer money to other currencies or live/travel abroad, but I'm sure we will feel some impact at the home front too with all the trading we do with other countries.

What does it mean for us? Is this called inflation in a way? (not inside US but in world trade). How will it affect us in the near future?

What would raise the value of the dollar and what would be the side effect of it?

This is so confusing to me.

Take out your crystal ball and tell me
Well - the world changed, didn't it! !!!!!
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Old 08-16-2015, 07:27 PM   #44
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I too believe the dollar will inexorably decline. As a consequence, I have a fairly large slug of foreign equity mutual funds and individual stocks in mostly non-US, commodity-related companies (especially commodities that are typically priced in dollars). I have also had a substantial amount in CD's denominated in Brazilian reais for the past 3 years. There was a bit of a blip during the depths of the recent financial panic, as investors fled to US treasuries, but the real has now resumed its long march up against the dollar, and I think it will continue.
How did that work out?
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Old 08-16-2015, 07:30 PM   #45
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Who dares bump this thread from six years ago!?
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USD has come a long way (the tables have turned since this thread was posted in 2009)... My USD has been doing so much better against CAD (I am in Canada now..)

I imagine some of you are happy that USD is stronger while some are unhappy... It feels kind I am riding some kind of roller coaster... (Making a huge purchase could be tricky...)
Oh I see - you are the OP and so bumped up your own thread. Yes, the world really did change quite a bit.

I don't try to guess foreign exchange stuff no matter how "logical" a predicted scenario seems. I have a set % amount invested in foreign assets, and as it goes up and down relative to the US$ I rebalance.
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Old 08-16-2015, 07:51 PM   #46
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The dollar changes over time... nothing new....

When I was working in the UK in 2000, the dollar was even stronger than today... the euro was worth less than $1 (I think it got to the low 90s high 80s... just do not remember)... I think that the exchange with the pound was closer to 1.25....


Now, try explaining to someone who knows nothing about the exchange rates that you are actually on budget in local currency but way down when it is converted to US$.... 'Yes, I know we are over budget but the budget was based on 1.50....'.... they just do not get it...


I think that the dollar vs pound was up to 1.80, but only see 1.70 on the chart I am looking at... a big swing...
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Old 08-16-2015, 09:02 PM   #47
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How did that work out?
Poorly, for the most part. I got out of the real denominated CDs in 2010. I also shifted away from commodities in 2011-12. But I have maintained a substantial allocation to foreign equity funds (VGTSX, DODFX) and that has mostly been a drag on portfolio performance.
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Old 08-17-2015, 05:26 AM   #48
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Poorly, for the most part. I got out of the real denominated CDs in 2010. I also shifted away from commodities in 2011-12. But I have maintained a substantial allocation to foreign equity funds (VGTSX, DODFX) and that has mostly been a drag on portfolio performance.
Sounds like your move out of commodities was timely.

International was a drag on portfolios in 2014, but not this year. I rebalanced buying more at the start, and there has been a nice recovery.

I think quite a few people have a large international exposure to diversify away from US assets, but every country/region has its own challenges.

I found your 2009 post very interesting, because things can seem so clear at one point in time, but still turn out completely different than expected. Which is why I gave up investing based on my expectations long ago.
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Old 08-17-2015, 05:59 AM   #49
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So now do we come back to this thread in 6 or 7 years from now and again see what we were thinking? Seriously, it might be fun.

I've put it in my calendar for Sept 29, 2021...see you all there, (God willing!)
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Old 08-17-2015, 09:15 AM   #50
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Same as many here, I feared inflation but that did not happen. My overweight in foreign stocks particularly EM and also material sector stocks worked out well in 2009-2011 in the sense that they beat S&P, but then fizzled out. I hanged on them too long, and gave up quite a bit of gain.

But, but, but I have seen in the past that things rarely happen as quickly as people think. When the last person capitulates is the time it finally occurs.
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Old 08-17-2015, 09:26 AM   #51
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The inflation thing - people were very loud and sure for a long time that inflation would go up, maybe way up. Now with commodities dropping so much and oil so weak it seems likely it could stay low longer.

But who knows, 5 years from now......
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Old 08-17-2015, 10:15 AM   #52
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The inflation thing - people were very loud and sure for a long time that inflation would go up, maybe way up. Now with commodities dropping so much and oil so weak it seems likely it could stay low longer.

But who knows, 5 years from now......
Yes, that inflation thing. Commodities prices almost tripled between '00 and '14 and US inflation has been minimal. Real sustained high inflation in the US is not likely without similar rates of growth in average wages or large increases in consumer credit.
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Old 08-17-2015, 11:44 AM   #53
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... Commodities prices almost tripled between '00 and '14 and US inflation has been minimal...
China's growth rate had a lot to do with that. But now that China economy growth has tapered, plus so many commodity producers have ramped up their output, commodity prices have cratered.

I think it is going to be more difficult to make money in the next few years. Pundits including Bogle have repeatedly warned investors to lower their expectation. And also, it explains why people pile into any sector that promises some growth, like biotech and high techs such as Google.
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Old 08-17-2015, 12:29 PM   #54
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Yes, that inflation thing. Commodities prices almost tripled between '00 and '14 and US inflation has been minimal. Real sustained high inflation in the US is not likely without similar rates of growth in average wages or large increases in consumer credit.
It's pretty amazing that inflation was so low in spite of spiking commodity prices. And now that commodity prices have cratered, it seems it will stay low.
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Old 08-17-2015, 05:27 PM   #55
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In 1990 I purchased a new Toyota Tercel for $3,200 while similar new car 25 years later is about $15,500. A new town home in 1990 was $195K while same used home is currently $595K. Yet if you are looking 100 years back, the current USD has lost about 95 to 98% of it's purchasing power. Of course there were brief periods of deflation but the long trend is inflation.
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Old 08-17-2015, 09:57 PM   #56
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In 1990 I purchased a new Toyota Tercel for $3,200 while similar new car 25 years later is about $15,500. A new town home in 1990 was $195K while same used home is currently $595K. Yet if you are looking 100 years back, the current USD has lost about 95 to 98% of it's purchasing power. Of course there were brief periods of deflation but the long trend is inflation.
Are you certain about that date? I just ran across the window sticker for my '82 Tercel and IIRC it was a bit over $6K (only had AC and a cheap radio as options.)

I'm always surprised that we have relatively "low" (a very relative term) inflation since the late '70s/early '80s. We have most certainly "inflated" the currency. Why it hasn't translated into "run away" inflation always puzzles (but, so far pleases me.) YMMV
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Old 08-18-2015, 08:22 AM   #57
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Are you certain about that date? I just ran across the window sticker for my '82 Tercel and IIRC it was a bit over $6K (only had AC and a cheap radio as options.)

I'm always surprised that we have relatively "low" (a very relative term) inflation since the late '70s/early '80s. We have most certainly "inflated" the currency. Why it hasn't translated into "run away" inflation always puzzles (but, so far pleases me.) YMMV
The MSRP on my Tercel was at about $5,500 but thanks to my professional cars salesperson relative I was able to get it for $3,200.
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Old 08-18-2015, 09:41 AM   #58
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In 1990 I purchased a new Toyota Tercel for $3,200 while similar new car 25 years later is about $15,500. A new town home in 1990 was $195K while same used home is currently $595K. Yet if you are looking 100 years back, the current USD has lost about 95 to 98% of it's purchasing power. Of course there were brief periods of deflation but the long trend is inflation.
At the same time, I think we can all remember back to the 70's when $10K per year was considered "executive pay". Costs have gone up but so has income.
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Old 08-18-2015, 09:43 AM   #59
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For that new Town home in 1990 with 10% down and prevailing 10% interest rates the PMI was $1,540, and you paid an average of 2.1 points or $3,680 to get the loan

In 2015 at $595,000 with 10% down and prevailing 3.75% interest rate your monthly payment is $1,673 points now average .6 or $3,213 to get the loan.

Primary Mortgage Market Survey Archives - 30 Year Fixed Rate Mortgages - Freddie Mac

In my neighborhood homes were worth about $130,000 and property taxes $2,000 per year in 1990 and now the homes average value is about $185,000 and property taxes average $1,500 per year. Which means the PMI is now $771 down from $1,026, with the savings in property taxes home ownership here is $295 less expensive per month in 2015 than in 1990.

In 1990 new car loans were still typically for 3 years and at the prevailing 11.5% interest the monthly payment would be $197. A 4 year loan would have meant payments of $156.00.

Today a new car at $15,000 with 1% interest for 60 months would mean a payment of $256. A 3 year loan with interest rates as they were in 1990 would mean payments of $495 per month, and the house would have a payment of $4,700 at 10 percent mortgage rates.
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Old 08-18-2015, 01:16 PM   #60
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For that new Town home in 1990 with 10% down and prevailing 10% interest rates the PMI was $1,540, and you paid an average of 2.1 points or $3,680 to get the loan

In 2015 at $595,000 with 10% down and prevailing 3.75% interest rate your monthly payment is $1,673 points now average .6 or $3,213 to get the loan.

Primary Mortgage Market Survey Archives - 30 Year Fixed Rate Mortgages - Freddie Mac

In my neighborhood homes were worth about $130,000 and property taxes $2,000 per year in 1990 and now the homes average value is about $185,000 and property taxes average $1,500 per year. Which means the PMI is now $771 down from $1,026, with the savings in property taxes home ownership here is $295 less expensive per month in 2015 than in 1990.

In 1990 new car loans were still typically for 3 years and at the prevailing 11.5% interest the monthly payment would be $197. A 4 year loan would have meant payments of $156.00.

Today a new car at $15,000 with 1% interest for 60 months would mean a payment of $256. A 3 year loan with interest rates as they were in 1990 would mean payments of $495 per month, and the house would have a payment of $4,700 at 10 percent mortgage rates.

Where do we go from here, I wonder. Seems like we have boxed ourselves in pretty well.
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