Well its probably the other way around.
As early as November 2004 I questioned if the US dollar might not one day share its role as world reserve currency or worse, lose it altogether.
The Daily Pfennig had this quote from Jim Rogers this morning from a speech in Singapore;
"The U.S. dollar is in the process of losing its status as the world's reserve
currency, sterling went down 80% from top to bottom (when it lost its
status as the world's reserve currency), the U.S. dollar's going to go
down a lot in the next decade or so."
Change on this front seems inevitable. It makes sense to explore what markets will benefit from this rotation in the currency market.
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7 comments:
More on stops from Bill Cara's blog
http://www.billcara.com/archives/2006/04/protecting_asse.html#more
Seems to be a hot topic these days...wonder why?
the dollar has already fallen a lot over the last 6 or 7 years. I agree it will decline over the next decade, but how far and versus which currencies?
Also I would plan on the unexpected.
Moved 66% of my cash to FXE.
Bought some PAL URRE and PEIX on the panic. Will buy the metals after the big debacle.
The metals meltdown will result in a HUGE buying opp.
Not dead yet here.
Ignore Cramer. He not only aggrivates your headache, he blows his own horn and can't get you into anything that hasn't already run up. When one sees his LT record, it's no better than other managers. Joke IMHO.
In place of that disister show, play some classical music.
My rate of return, after recalc, has been 50% net of taxes, comissions, and brokerage fees over the last 1.5 years. Better than I thought.
Tweaking a portfolio to buy and hold is a disaster. You've got be on the ball, every day, ready to move. Otherwise go to cash, and wait for a bond yield peak and buy.
Cramer's on and I gotta go take an Advil.
One likely scenario that I see with the dollar coming down in value due to diversification is the Chinese buying up euros. Seems likely. They're already exposed to Asia since they are China. No need then to buy the yen. Euro is the likely candidate and would likely appreciate the most vs. the dollar.
DaveB thanks for sharing your plan and your humor. I don't know if you are correct but a plan of decisive action is a good start.
David Andrew Taylor, the euro makes sense, of course but what about big trade partner Australia and what about the swissi as an above the fray safe haven?
I'm inclined to doubt the Australian and Swiss economies and currency float are large enough to play any significant role in a world currency realignment. I feel pretty much the same about commodities. It seems possible that stronger alignments within global trading blocks might form in which case it would be interesting to see which block the Aussie$ aligned with but a broader extension of the current Yen/Yuan relationship into a Yen/Yuan/Euro/USD relationship seems more likely IMHO.
I've tended to think of this as a kind of evolving basket but that's probably wrong - there will be no single world currency - just a gradual (one would hope) revaluation of the major currencies and a resetting of the exchange rate trading bands to more closely align them so that global trade can proceed 'normally' regardless of how regional trading blocks align.
Assuming any of that is close to the mark, the big question will be "how fast" and, if it's too fast, would any 'safe haven' be safe enough, particularly for those whose liabilities are denominated in USD$.
Roger....
The Swissy sounds like a good play. And for that matter, so does the pound. But, your exposure to those areas are going to be fairly equal. This is evidenced in the 30% increase in the euro and swissy vs. the dollar. However, the EUR/CHF cross rate itself only appreciated about 5% in the same timeframe when the dollar sold off last time. Either would be a great diversifiction without sacrificing return potential.
As for the Aussie, it looks like we may have finally posted the low about four weeks ago, and Aussie looks set to appreciate. Interest rates down under are still the best of the industrialized nations. That may actually be the reason that the Aussie has been limp in the face of increasing commodity prices. There's no real room for interest rates to go higher down there while the rest of the world has started to raise rates. Still, appreciation could be earned if countries start to diversify out of the dollar and into other trade partners they may have. I could definitely see that. I also see the Fed being forced to lower rates after they're done fighting inflation. That of course would knock out any value in the dollar across the board.
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