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A Good Day in the US Market



April 20, 2011 – Comments (7) | RELATED TICKERS: FXA , FXE , CYB

Most people looking at the headlines for today would conclude it was a great day to be in the market with the S&P500 up 1.35%.

That's a good conclusion, as long as you measure gains in US$.  But, the greenback didn't have such a great day.  How would some foreign investors holding the S&P500 have done today?

Measure that nice S&P500 move in euros and the big gain evaporates to nearly nothing. 

A Swiss or Norwegian investor did a bit better, but only clocked about a tenth of a percent.  

Our friends in Great Britain, Mexico, Chile and Canada held on to a little under one percent. 

Value your portfolio in Swedish Krona or Australian dollars?  Sorry, those nice gains we saw in the US are a loss for you.

I'm no expert on currency trading, but I do know the weakening dollar will have impacts on our finances.  Stuff we buy from outside the US will get more expensive.  Treasury rates will head up as investors demand higher yields to compensate for the risk of getting repaid in less valuable dollars.

On the flip side, companies that generate a lot of revenue outside the US will pick up a tailwind from the currency exchange - particularly if their costs are in US$.

For the Foolish collective - Are you doing anything to hedge against or profit from currencies?  If so, please share.

Disclosure:  Long Aussie$ via the FXA etf.



7 Comments – Post Your Own

#1) On April 20, 2011 at 7:14 PM, Varchild2008 (85.34) wrote:

I have some Hedges in front of my House... Does that count?

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#2) On April 20, 2011 at 8:22 PM, ikkyu2 (98.57) wrote:

Russ, what I'm doing to hedge against the dollar is owning equities.  I'm happy to stay even against the Euro if the dollar is going to crump.

I also own a bit of foreign equity, about a quarter of my portfolio.  The smart guys say that in the long run currency fluctuations even up, and in the short term I'm no George Soros, so I try to be diversified against sovereign and currency risk and then not worry too much about it.

My Japanese video game maker, KNM, is part of my diversification plan: yen exposure, video game sector exposure, casino exposure.  But it's lost 20% since the disaster.  It's a small part of my foreign equity exposure.  That's diversification.

You can diversify by owning US stock too: PM (Philip Morris Int'l) sells smokes for every currency except the dollar, then repatriates the cash.  If the dollar is weak, then all that foreign currency buys more dollars!  I know you don't believe in holding tobacco stock but any US corp that does the same (and actually repatriates their earnings) can help you this way.

That's all I got - looking forward to what others have to say. 

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#3) On April 20, 2011 at 8:54 PM, portefeuille (98.32) wrote:

a comparison of some "index ETFs".

5y chart.



5y chart minus 2008 and 2009.


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#4) On April 20, 2011 at 9:01 PM, HarryCaraysGhost (77.10) wrote:

How about-

BUD- Foreign company with great U.S exposure.

VISA- Growing foreign expousure (almost 50/50)

Silver miners, and physical Silver.

That's all I got,wish I could get into specific details but I formed my opinion a few yrs back and my short term memory sucks...:)

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#5) On April 20, 2011 at 9:28 PM, kstarich (28.98) wrote:

The swiss franc will continue to strenthen.  I did a blog on currency crises last Sept and listed quiet a few countries and currency.  All is playing out.  The transit i describe in the blog is going to start to hit again in May so watch for further dollar drop.  i think i need to do another blog on it. 

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#6) On April 20, 2011 at 9:33 PM, kstarich (28.98) wrote:


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#7) On April 21, 2011 at 7:27 AM, rd80 (96.82) wrote:

Varchild2008 - Well, they'll be useful if you ever run in to Knights who say Ni.  I think it would also count as diversification if the hedges were edible or smokable.

ikkyu2 - Other than the FXA, I really don't look at global operations all that much.  But, the type of stocks I like tend to put me in companies with a lot of business outside the US, e.g. MCD.  I also put a sizeable chunk of my 401k in an international stock fund.

portefeuille - thanks for the charts.  I wouldn't have guessed Russia for the best performing market over the past five years.

HarryCarysGhost - Good choices all.  I owned BUD before the InBev buyout and need to give it another close look.  Love Visa's business model, but have thought it was expensive everytime I looked at it or Mastercard.  Silver is starting to look scary - it's either real, which means the economy is headed for another disaster, or it isn't and then those nice gains take a hit.

kstarich - Aye on the franc.  I opted for exposure to the Aussie$ because of the high short term rates there, but the Swiss Franc seems like an excellent choice as well.

GO CAPS! (hockey, not the website)


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