Monday, August 03, 2015 02:40am
North Adams, MA now: 63 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
LOG IN | REGISTER NOW   

Home About Archives RSS Feed
The Independent Investor: Does Cash Mean Currencies?
By: Bill Schmick On: 02:09AM / Friday September 03, 2010

There was a time when one of the rules of asset allocation was to always keep a little cash in your portfolio. Cash was the safest bet you could make. It became the place where we retreated when the markets were in free fall. Today, however, cash as an asset class, earns almost nothing. As a result, many individual investors are using that cash to trade currencies and in the process transform the world’s safest investment into something a lot more speculative.

The headline on the front page of Wednesday's Wall Street Journal read "Currency Trading Soars." The article explained that buying and selling currencies has become a $4 trillion a day market. How much of that volume is attributable to individual investors is hard to measure but from my own experience I can tell you that investing in currencies has never been easier or cheaper. Thanks to exchange traded funds (ETFs), the average Joe has his pick of 44 currency funds that are as easy to buy and sell as individual stocks.

Here in America, where since World War II we have been accustomed to having one of the world's strongest currencies, the desire to invest in other country's currencies has not been high on the list of investment priorities. The currency markets were something that banks used to square up their overseas borrowing or to provide you the necessary currency for your vacation to Hong Kong or Spain. It has only been in the last few years that Americans have begun paying attention to the dollar and its overseas purchasing power.

In other countries, where the fluctuations in the value of their currency can mean the difference between a secure future and poverty, trading in and out of currencies has been a way of life and a traditional avenue of investment. With the introduction of internet trading, ETFs and around-the-clock trading, retail investors in places like Japan, China and throughout the Middle East make a career of day trading currencies.

Clearly currencies markets offer the investor more depth. The currency market, at $4 trillion per day, dwarfs the trading in stocks which is only $130-$140 billion per month. The bond market is much larger and averages $456 billion/day but is still less than half the size of the currency markets.

"The stock markets are totally manipulated by a handful of big players. Bonds provide me less than the rate of inflation. Currencies, on the other hand, can make me a lot of money if I’m on the right side of a trade," argues one retired, ex-Fortune 500 executive who trades currencies by buying and selling ETFs.

During this summer he shorted the dollar (bought an inverse U.S. dollar ETF) and went long the Yen (bought a Japanese currency ETF).

"I made more money in currencies than I made in stocks since April," he crowed.

Although I congratulated him on his investment prowess, I also warned him that he was swimming with the whales in currency markets. Banks, hedge funds and mutual fund currency departments with trillions to throw around can outgun him money-wise, volume-wise and information-wise. These boys also have 24 hour trading departments. If the Japanese government were to suddenly intervene in their currency market, sending the yen dramatically lower (and the dollar higher), my friend could easily wake up tomorrow morning to a sizable loss before he could do anything about it.

This summer's collapse in the Euro was largely triggered by hedge funds. Riding the hedgies coattails works but only until it doesn't. The retail investor was the last to know when those big dogs reversed that trade. My advice to the majority of investors is to keep your cash in a money market and not try to speculate with it in the currency markets.

A better bet would be to buy a country fund or ETF if you believed the prospects of the country were better than most. That way, if you are right, you get a double win both on the country's currency and on its stock market.



0 Comments
Tags: currency, dollar      
News Headlines
Berkshire Force Loses Second Straight at World Series
Lanesborough Bulldogs Bow Out of Cal Ripken Regional
Berkshire Force Takes First Loss at World Series
Volunteers Clean Up at North Adams' First Annual Appalachian Trail Day
Pittsfield Election: Nomination Deadline Passes
Aggie Fair Crowns 2015 Prince & Princess.
SteepleCats Win Regular Season Finale
Lanesborough 11U Bulldogs Fall in Regional Opener
First Responders Receive Tactical Training at Drury High School
Our Neighbors: The Teacher

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (176)
Independent Investor (238)
Archives:
August 2015 (1)
August 2014 (6)
July 2015 (6)
June 2015 (8)
May 2015 (6)
April 2015 (8)
March 2015 (6)
February 2015 (7)
January 2015 (9)
December 2014 (7)
November 2014 (4)
October 2014 (9)
September 2014 (5)
Tags:
Euro Election Europe Oil Stock Market Crisis Economy Japan Stocks Greece Recession Commodities Federal Reserve Housing Markets Deficit Currency Retirement Bailout Fiscal Cliff Taxes Debt Fed Pullback Jobs Selloff Metals Stimulus Debt Ceiling Rally Interest Rates Banks Energy Europe Congress
Popular Entries:
The Independent Investor: Don't Fight the Fed
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
@theMarket: Month-End Musings
The Independent Investor: Supermarkets Evolve to Survive
The Independent Investor: Are You Ready for El Niņo
@theMarket: O Ye of Little Faith
The Independent Investor: When 'No' Means 'Yes'
@theMarket: Global Markets Weather a Wild Week
The Independent Investor: Same-Sex Marriage Good for Business
@the Market: Second Quarter Earnings on Deck
The Independent Investor: Tiny Houses Gain Appeal
@theMarket: From Russia With love


Blue Moon Rooftop Party
Partygoers danced under a blue moon atop Greylock Gardens...
2015 Adams Aggie Fair
The 41st annual Adams Agricultural Fair opens this weekend...
Blue Moon Rooftop Party
A sold-out crowd partied under a blue moon and atop...
Down Street Art and Polish...
Thursday was a big night in the Northern Berkshires with...
Park Street Fair (Hi-Jinks...
Park St. was closed off to traffic Monday night for the...
Gather-In Festival 2015
The annual Gather-In, a celebration of Pittsfield's...
'Romeo & Juliet' @ Pittsfield...
Free performances of 'Romeo & Juliet' run through Aug. 2 at...
LaFesta Baseball 2015
The LaFesta Baseball Exchange marked its 25th anniversary...
Bulldogs Win Cal Ripken State...
The Lanesborough Bulldogs used a big base-running play to...
Spark @ Naumkeag
Berkshire Creative held its July Spark mixer at the...
LL: Pittsfield vs Longmeadow
The 10- and 11-year-old Pittsfield National Little League...
Pittsfield Polish Picnic
St. Joseph's Church in Pittsfield hosted the annual Polish...
Pittsfield Babe Ruth WMass...
The Pittsfield Babe Ruth 15-year-old All-Stars beat Holden...
Shire City Sessions July 2015
The inaugural Shire City Sessions drew a crowd to hear US...
3rd Thursday June 2015
Pittsfield's 3rd Thursday monthly street fair featured...
Cheshire Block Party
Cheshire's first Block Party featured live music, food,...
Blue Moon Rooftop Party
Partygoers danced under a blue moon atop Greylock Gardens...
2015 Adams Aggie Fair
The 41st annual Adams Agricultural Fair opens this weekend...
Blue Moon Rooftop Party
A sold-out crowd partied under a blue moon and atop...
Down Street Art and Polish...
Thursday was a big night in the Northern Berkshires with...
Park Street Fair (Hi-Jinks...
Park St. was closed off to traffic Monday night for the...
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings |
Advertise | Recommend This Page | Help Contact Us
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2012 Boxcar Media LLC - All rights reserved

Privacy Policy| User Agreement