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@ catch22: Are Currency Swings Worth The Worrying?
"Yup. One has to know what the intention and/or meaning of a particular investment is attempting to do.
Hell, healthcare will take a bang downward at some point in time, eh? One must pay attention to be an investor; deciding what they choose to do about/with risk and reward."
>>>The article mentions "Worrying"; but only in the title line.
As to currency swings. We all should understand that most standard active mutual funds do not apply a part of their operation to currency hedging. But, also part of our world of investing is that other choices exist that do allow for flexibilty with investment choices.
From the GMO article link:
While many investors cite volatility reduction as a rationale for currency hedging, a white paper from GMO's Catherine LeGraw argues:
1) Volatility may be cut over the short-term, but not over longer horizons >>>Correct
2) Volatility benefits have been reduced over time as companies become more global >>>Correct
3) Even if volatility is lowered for international holdings, it isn't reduced for the whole portfolio as the hedging simply makes holdings more correlated with U.S. stocks >>>Partially correct, IMHO
4) Hedging introduces leverage and hence tail risk (see the move in the Swiss franc). >>>Correct. Investing involves risk, period.
>>>You directed this post towards me, and I am guessing this was based upon my notes to your GMO article post.
Worrying here regarding investments? Not at this time. Which includes our holding of HEDJ. We sold our largest bond holding, LSBDX , beginning last October and unwound another large holding of PIMIX . LSBDX is at +.17% total return since mid-Oct, 2014 and -.21% YTD. PIMIX is about +3% YTD, and performing better than I expected. But, the monies from these sells have performed well with the purchases made with the monies.
We're about 65% equity between U.S. and Europe, at this time.
Europe, as we here know; has been going through stops and starts for investing for the past 5 years. The most recent QE program by the ECB may be of benefit; but I am not so sure of the overall long term value, at this time. The long time strength of the Euro finally started to decline (and stick) and we hope to ride this movement until the value of this is much less important.
Lastly, regarding the Euro currency. If, in conjunction the current QE policy of the ECB reducing interest rates and supporting bonds; that a positive recovery and strength for this areas exports will require the Euro to continue to devalue.
The holding periods for any of our investments is always subject to change dependent upon pricing and related market actions to any given sector.
The only sector of question at this time is U.S. real estate. Yes, this area has had a decent run for some time now; but I don't really find a reason for the recent weakness; other than profit taking.
Okay, time for more coffee; as I have to remove old carpeting/padding. YUCK !
Comments
This from my reply at your GMO link:
"Yup. One has to know what the intention and/or meaning of a particular investment is attempting to do.
Hell, healthcare will take a bang downward at some point in time, eh? One must pay attention to be an investor; deciding what they choose to do about/with risk and reward."
>>>The article mentions "Worrying"; but only in the title line.
As to currency swings. We all should understand that most standard active mutual funds do not apply a part of their operation to currency hedging.
But, also part of our world of investing is that other choices exist that do allow for flexibilty with investment choices.
From the GMO article link:
While many investors cite volatility reduction as a rationale for currency hedging, a white paper from GMO's Catherine LeGraw argues:
1) Volatility may be cut over the short-term, but not over longer horizons
>>>Correct
2) Volatility benefits have been reduced over time as companies become more global
>>>Correct
3) Even if volatility is lowered for international holdings, it isn't reduced for the whole portfolio as the hedging simply makes holdings more correlated with U.S. stocks
>>>Partially correct, IMHO
4) Hedging introduces leverage and hence tail risk (see the move in the Swiss franc).
>>>Correct. Investing involves risk, period.
>>>You directed this post towards me, and I am guessing this was based upon my notes to your GMO article post.
Worrying here regarding investments? Not at this time. Which includes our holding of HEDJ.
We sold our largest bond holding, LSBDX , beginning last October and unwound another large holding of PIMIX . LSBDX is at +.17% total return since mid-Oct, 2014 and -.21% YTD. PIMIX is about +3% YTD, and performing better than I expected. But, the monies from these sells have performed well with the purchases made with the monies.
We're about 65% equity between U.S. and Europe, at this time.
Europe, as we here know; has been going through stops and starts for investing for the past 5 years. The most recent QE program by the ECB may be of benefit; but I am not so sure of the overall long term value, at this time. The long time strength of the Euro finally started to decline (and stick) and we hope to ride this movement until the value of this is much less important.
Lastly, regarding the Euro currency. If, in conjunction the current QE policy of the ECB reducing interest rates and supporting bonds; that a positive recovery and strength for this areas exports will require the Euro to continue to devalue.
The holding periods for any of our investments is always subject to change dependent upon pricing and related market actions to any given sector.
The only sector of question at this time is U.S. real estate. Yes, this area has had a decent run for some time now; but I don't really find a reason for the recent weakness; other than profit taking.
Okay, time for more coffee; as I have to remove old carpeting/padding. YUCK !
Thanks for the question, or curiosity.
Take care,
Catch