Anyone moving to foreign cash?

[oddballstocks]

With all this default talk the idea has crept from the back of my mind to the forefront that maybe I should move some of my idle cash out of USD into something else for a few days. 

 

I guess the problem is I don't really know where to go with this thought, in theory any currency would be better than the dollar.  I guess another option is to buy calls on a currency etf.

 

I'm not concerned about a long term drop of the dollar I'm already used to that... I'm worried about a short drop and wondering if I can move out and back in to take advantage of some buying opportunities quickly.

 

Is anyone else thinking anything like this?  Am I totally crazy?

[biaggio]

it seems to me ,short term that too many people hate the US dollar.

 

I am buying US dollar stock.

 

Who knows, short term anything can happen.

 

There  seems to be a lot of cash being held (which includes myself) which makes me think that this is not a good position either.

[Uccmal]

Too many frictional costs on direct currency transactions to make it worthwhile. 

 

I buy US stocks regardless of the currency relationship.  In the long term the performance of a position will outweigh currency fluctuations.  That being said, a Canadian owning BRK would have been hard pressed to make any money since after it rebounded from the lows of 1999-2000.

 

I assume that once the Obama.Boenher circus is behind us the US dollar will return to its safe haven status.  I still question the relevancy of any of this since the US is still the safest place to hold money regardless of the outcome. 

 

Outcomes:

1) most likely - a compromise of some sort is reached by Tuesday

2) less likely - default on payments starts next week or later - Obama has to step in and take over the entire situation and looks like a hero.

3) least likely - a default starts, continues.  The ratings agencies downgrade US debt.  Congress continues to meet and hammers out a situation and the President signs it. 

 

I dont see the Canadian dollar dropping below 1.02 regardless of the positive outcome.  There might be some very short term currency arbitrage opportunities if there is a default but you need a spread of at least 3% to make any money.

[oddballstocks]

Too many frictional costs on direct currency transactions to make it worthwhile. 

 

....

 

 

I dont see the Canadian dollar dropping below 1.02 regardless of the positive outcome.  There might be some very short term currency arbitrage opportunities if there is a default but you need a spread of at least 3% to make any money.

 

Thanks for the replies, Uccmal I think you hit what I keep thinking is that while this might seem like a good idea in theory, it's the costs and the size of the spread that make the difference.  As I think about this I keep coming back to the idea that in the currency world a movement of a few bps is big, and to take advantage I'd need to lever up, and leverage is the exact wrong response to this sort of thing.

 

While this has been an interesting mental exercise I think it reinforces for me that I am not a macro trader, I need to just stick to my individual company analysis. 

[woodstove]

Well, I'm in Cdn currency and economy, so guess vs USD I'm already hedged.  This morning, bought more BRK.B under $75 USD, which is a good enough price I think, especially with an exchange premium on Cdn dollars used for purchase.  So I guess one might consider that a sale of CAD and a buy of USD, but really it's a swap of CAD cash for a USD-reported but global business enterprise.  Primary thesis ideas are that CAD/USD is momentarily higher than medium term average, and that the anxiety and uncertainty in the US economy will resolve ok and Berkshire will be one of the many good enterprises to successfully navigate the choppy waters.

[biaggio]

woodstove, agree with your post. Hope to add to BRK.B as well

[Valuebo]

I'm 75% in USD, 25% in EUR as an European. Most in BRK.B

 

Not like the Euro is any better and I don't see the same risk/reward posibilities in Europe.

 

 

You are extremely late in hedging your USD position oddballstocks. At least, that's my opinion.

[ubuy2wron]

There is no way in heck I would be hedging my US $ exposure at this stage except for perhaps the next week. One outcome of all of this political soap opera is that regardless of who claims victory in the end. The US balance sheet is going to be improved the trajectory of the debt is going to be on a very different path. This is why the bond mkt is completely sanguine about the debate and the outcome. Only if the house completely caved and gave Obama everything HE wanted or the GOP thinks he wants would the bond mkt. be having fits. The equity mkts however are a different kettle of fish. The US $ should catch a bid and start to reverse the 10 year bear mkt for the greenback. I still say this is ALL a sideshow Europe over the next 6 months is what is going to cause us more sleepless nights and has the potential to cause shudder permanent loss of capital if they get it wrong. As Churchill I think said you can count on the US to do the right thing after they have exhausted all alternatives, I think we are just seeing them actively follow their typical path. I think no resolution will be reached this weekend we likely need a few more days like yesterday to galvanize a compromise. Perhaps Obama should threaten to sell the gold in Ft Knox to pay the bills that would get the attention of the ideologues and force a compromise.

[cwericb]

"Perhaps Obama should threaten to sell the gold in Ft Knox to pay the bills that would get the attention of the ideologues and force a compromise."

 

That was mentioned in the news yesterday that they were thinking of that as an option.