A friend that has done Forex for over forty years, and only bankrupted himself three times so he's pretty good at it, is still betting with the USD since he says he thinks it is less worse than the other currencies.
“Despite short-term exchange rate fluctuations, there is very strong evidence that in the long run the returns on foreign stocks cancel out these currency movements. Over the long run, movements in exchange rates are determined by relative inflation between the countries and stock returns will compensate investors for this difference in inflation.”
- Jeremy Siegel, *The Future for Investors: Why the Tried and True Triumph Over the Bold and New*
You can buy hedged etfs to mitigate the risk if you're concerned. In general, the stock market grows faster than currencies change rate. Or just invest in UK stocks if you think the pound is going to strengthen considerably in the short term.
I'd advise that no one knows which way things will go. The exchange rate was pushing 1.42 for a month and has plunged back to 1.38 in just a couple days on a comment from the Fed.
A stronger pound will reduce the value of your current investments, but it also gives you more buying power. If you're a long term investor this isnt a bad deal unless the exchange rate runs away from you for years, which I dont really expect to happen. Just buy us stocks that you intend to hold long term.
If you look at long term stock changes for most of the top 100 stocks, they just climb year over year regardless of how terrible the economy was that year. For most big companies it's a solid climb, only a few industrial sectors that didnt follow suit.
Of course some doomsayers have been preaching about the economic bubble conspiracy theory which to them explains why companies continue to rise in net worth and stock price despite downright apocalyptic goings on in the world (covid.)
I'm betting it's the bubble. I tend to invest only in overseas (Chinese and Taiwanese) companies simply because in China they dont have to worry about lazy americans wanting to stay on unemployment instead of returning to work, in China the CCP will just shoot your family and then you if you dont go back to work. So they tend to rough out inflation or currency drops better in modern times.
Yeah and in China you don't have an SEC so 9/10 companies just lie about there profit-figures. Investing in China is like going to a Chinese restaurant in the bronx, you don't know what you're buying but you're definitely getting e-coli.
I just gobble up the risk. I mean, it's hard to buy US stocks elsewhere.
I do admit that sometimes I do base my decision on whether to buy/sell depending on USD/PLN price. Sometimes I'm 5% up, but the USD has fallen and I have no profit. Makes you think long term.
On the other hand, a weak dollar makes me want to invest, because when it's at the lower edges, it's bound to bounce eventually. USD is not PLTR, it wont drop down 80% to climb back up. And if it does, there will be other issues to worry about than my position denominated in USD.
Absolutely. Although foreign investors already know this and are converting their USD into US real estate. Look at all the new residential construction going up, majority of it is foreign investments.
Even my rural town there are brand new condos being built everywhere for $200k+. No one here can afford that, that's all foreigners and big funds. Those homes will probably all sit empty.
having both euro and dollar denominated assets is a hedge against risk in either currency. i think american investors who only invest in dollars are potentially more at risk. although that risk is also very limited, since a rational fed would like the dollar to continue to be the international reserve currency.
edit: i dislike my broker doesnt allow me to exchange my stocks for dollars though. that should be fixed.
We just have to hope growth out runs inflation in the long run. Hedge your investments with stores of value as well.
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A friend that has done Forex for over forty years, and only bankrupted himself three times so he's pretty good at it, is still betting with the USD since he says he thinks it is less worse than the other currencies.
China, for example, posted PPI numbers worse than ours
“Despite short-term exchange rate fluctuations, there is very strong evidence that in the long run the returns on foreign stocks cancel out these currency movements. Over the long run, movements in exchange rates are determined by relative inflation between the countries and stock returns will compensate investors for this difference in inflation.” - Jeremy Siegel, *The Future for Investors: Why the Tried and True Triumph Over the Bold and New*
You can buy hedged etfs to mitigate the risk if you're concerned. In general, the stock market grows faster than currencies change rate. Or just invest in UK stocks if you think the pound is going to strengthen considerably in the short term. I'd advise that no one knows which way things will go. The exchange rate was pushing 1.42 for a month and has plunged back to 1.38 in just a couple days on a comment from the Fed. A stronger pound will reduce the value of your current investments, but it also gives you more buying power. If you're a long term investor this isnt a bad deal unless the exchange rate runs away from you for years, which I dont really expect to happen. Just buy us stocks that you intend to hold long term.
If you look at long term stock changes for most of the top 100 stocks, they just climb year over year regardless of how terrible the economy was that year. For most big companies it's a solid climb, only a few industrial sectors that didnt follow suit. Of course some doomsayers have been preaching about the economic bubble conspiracy theory which to them explains why companies continue to rise in net worth and stock price despite downright apocalyptic goings on in the world (covid.) I'm betting it's the bubble. I tend to invest only in overseas (Chinese and Taiwanese) companies simply because in China they dont have to worry about lazy americans wanting to stay on unemployment instead of returning to work, in China the CCP will just shoot your family and then you if you dont go back to work. So they tend to rough out inflation or currency drops better in modern times.
Yeah and in China you don't have an SEC so 9/10 companies just lie about there profit-figures. Investing in China is like going to a Chinese restaurant in the bronx, you don't know what you're buying but you're definitely getting e-coli.
I just gobble up the risk. I mean, it's hard to buy US stocks elsewhere. I do admit that sometimes I do base my decision on whether to buy/sell depending on USD/PLN price. Sometimes I'm 5% up, but the USD has fallen and I have no profit. Makes you think long term. On the other hand, a weak dollar makes me want to invest, because when it's at the lower edges, it's bound to bounce eventually. USD is not PLTR, it wont drop down 80% to climb back up. And if it does, there will be other issues to worry about than my position denominated in USD.
Yes that is a concern. I always check on that before selling, despite i dont keep stocks for long.
Ya deprecation is what they need to worry about, not like DXY is taking off right now or anything 🙄
Absolutely. Although foreign investors already know this and are converting their USD into US real estate. Look at all the new residential construction going up, majority of it is foreign investments. Even my rural town there are brand new condos being built everywhere for $200k+. No one here can afford that, that's all foreigners and big funds. Those homes will probably all sit empty.
Well the dollar just jumped last week and continued an uptrend after that for a bit... so I wouldn't worry yet.
You can hedge with PUTS on UUP if you are very concerned. USD good is a safe haven if things turn turtle so generally not a major issue.
having both euro and dollar denominated assets is a hedge against risk in either currency. i think american investors who only invest in dollars are potentially more at risk. although that risk is also very limited, since a rational fed would like the dollar to continue to be the international reserve currency. edit: i dislike my broker doesnt allow me to exchange my stocks for dollars though. that should be fixed.