CurrencyShares Euro Trust (FXE)

Persuter (99.49) Submitted: 3/10/08 11:33 AM

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This is a bizarre post. First off, FXE isn't trying to make money in the currency market, it offers a vehicle for people to invest in currency through the stock exchange. It makes money by charging the investors, like every other fund. (And it charges them very little, since it's a very simple fund.) One really nice thing about it is that you can buy stock options, allowing you great leverage without the risk of trading on margin.

Second, of course you can predict the direction of a given currency. You may not be accurate, but that's no different than with the stock market. Indeed, there's way more information available about the fundamentals of a given currency than there are about the fundamentals of a given stock. When you have a president like George Bush, who has currently borrowed over 3 trillion dollars on the taxpayer dime to finance his popularity, it's easy to predict which way the dollar will go.

Not to mention, when the only thing the Democrats and Republicans can seem to agree on is taking out another 150 billion in forced taxpayer loans as an "economic stimulus", it's REAL easy. I don't even understand the intent behind the stimulus, it's literally like it's malicious or something: "Hey, you owe $30K on your house and another $10K on your credit cards, and we already borrowed about $1K in your name this year to finance a war that's spiking oil prices... so here's ANOTHER interest-only loan for your ass! Bwahahaha!"

Not to mention the twin swords of Damocles in the form of the dollar-denominated petroleum market and the massive quantities of dollar reserves China has to devalue the yuan. Both represent large sources of demand for our dollar, and both are in the hands of countries that do not like us all that much. Moreover, in both cases, the dollar's decline is an incentive to stop using it.

The dollar is a shaky currency at best right now -- I have almost all my portfolio cash in euros, and am up about 15% on the year. I think until we see real signs that the American economy is growing strongly again, euros, or another strong currency that is less influenced by America's economy, will unfortunately have to be the choice. (And as long as we have decided to borrow our way out of a credit crunch, I don't think that will happen.)

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UCLAgrdstnt (84.06) Submitted: 5/09/08 9:07 PM

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I do a lot of research on stocks and the markets so I am no sure where I saw it but I very much agreed with the following statement:

"A countries' currency is in many ways similar to a company's stock. When a country is healthy and strong and expanding it's currency generally goes up. The opposite is true when a country is faltering".

This is not always true (see the unwinding of the carry trade in Japan in 1998... and now) but it often has a lot of merit. the US is a poor country right now in many ways. Huge debt (both government and private), a slowing economy, wealth destruction, etc. On the other hand many foreign countries are flush with cash, are expanding their GDP, and have many citizens with high savings rates and money available.

This makes currency in Asia especially attractive right now, though I expect a worldwide recession will slow, at least somewhat, growth there as well eventually.

I actually think the the FXE is not a good investment right now because the European market is starting to slow and eventually they will have to shore up this weakness by... guess what? lowering interest rates... the mechanism by which a weakening economy reflects itself on weakening currency.

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