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tommy Eternal Order Devil's Island 16532 Posts |
Enemy at the Gate, springs to mind.
If there is a single truth about Magic, it is that nothing on earth so efficiently evades it.
Tommy |
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Pecan_Creek Veteran user The Nation of TEXAS! 323 Posts |
I guess as a non economist, I would think the hedge against currency devaluation would be buying gold like so many do. Or stocking up on tradeable items i.e. fuel, ammo, car parts , women, etc...
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tommy Eternal Order Devil's Island 16532 Posts |
Own nothing control everything. Possibly the best investment one can make, is putting oneself in a position of power. I met a farmer once upon a time, he was a church councillor. Not only did it make him millions but made his friends billions. I did not know him long before he died but long enough for him to explain a little of how it worked. The little church council, it had the power to turn cheap farm land into expensive building land. What chance do you think you have have when you are up against these people, the people who own nothing and control everything?
:)
If there is a single truth about Magic, it is that nothing on earth so efficiently evades it.
Tommy |
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General_Magician Special user United States 707 Posts |
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Ah, But through out the various crises the US Economy has been the least volatile. While I'm no fan of big corporate capitalism , I'm certainly glad the US corporations are better at it than anyone else. And our Fed is better at evening out the rough spots than similar bodies in other systems. I think it's still a good idea to have some international investments. I mean, I would keep my investments heavily weighted toward US securities with about 25% to no more than 30% weighted to international investments. Again, my ideal choice right now is index funds. I am going to try to make time practice picking stocks without using any real money for a year or two to see how good I am at. If I am any good, I might try investing in individual stocks with real money. But I think it's a good idea for me to try not to use any real money and just research and find what I think is a good stock and see if my picks were right over a year or two. Quote:
Edit: Yes, our snipers are excellent shots. Hey, wasn't Chris Kyle from Texas? Texas has produced a lot of war heros. Audie Murphy is another one that springs to mind. Ohh yes, then their is Marcus Lutrell who the movie Lone Survivor is based on. He's from Texas too! And a Navy SEAL.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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Dannydoyle Eternal Order 21214 Posts |
Why do you think having "international investments" is such a good idea?
Danny Doyle
<BR>Semper Occultus <BR>In a time of universal deceit, telling the truth is a revolutionary act....George Orwell |
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General_Magician Special user United States 707 Posts |
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On Aug 7, 2014, Dannydoyle wrote: Why do you put international investments in quotation marks? International investments are investments that are not part of the economy of your native country. I looked up currency risk in a book entitled "Morningstar Guide To Mutual Funds." It would seem that for the most part, S2000 is correct in what he says about currency risk. However, I do think that any currency has risk though, even our own US dollar. You can hedge currency risk by buying a contract according to the book, but I am not famaliar with contracts and I like to keep things simple and easy to understand. Morningstar Guide to Mutual Funds states: Quote:
Morningstar writes: So in my case, my fund of index funds, with it's investments in international index funds never hedges currency, but academic studies show that currency hedging has only a minimal effect on returns over the long term, which in my view, investing is a long term thing (and given that I am a buy and hold investor, I invest for the long term when it comes to the goal of retirement). The big reason I think it's good to invest in international funds is to add diversification to your portfolio but it also depends on what goal you investing towards. It does add currency risk, but if you invest over the long term, it appears that currency risk has a minimal effect on your returns. Plus, their are plenty of investment opportunities outside of US markets that can provide returns to your portfolio tailored to the goals you have set for yourself. If you have a goal that is long term, then stock and international stock investments are probably a smart move but again, my preference is a good cheap index fund that saves me money on management and trading costs. However, if you have a shorter term goal you are investing towards, you might not want to take on as much risk. So your goals and the goals you have set for yourself are important before deciding whether an international investment is good for you or not. I just made some additional investments yesterday in my 401(k) fund after some downward movement on the stock market in the past few days. Still haven't lost any money (which even if I did, I would still simply hold on to my investments and keep buying when I can). Still have a return on investment despite the downward stock market movements (which honestly kinda surprised me a little). Part of the reason is because of my fund's dividend payouts.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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Pecan_Creek Veteran user The Nation of TEXAS! 323 Posts |
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On Aug 7, 2014, General_Magician wrote: Yes he was, Big Audie Murphy museum here: http://www.cottonmuseum.com But I never understood the connection between Audie Murphy and cotton. Except maybe he picked some as a kid. Of course TEXAS produces the best, Where have you been? (BTW, GWB is really from CT. ) |
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mastermindreader 1949 - 2017 Seattle, WA 12586 Posts |
EVERY state has its share of war heroes. Texas has 76 Medal of Honor winners. New Jersey has 94 and New York has 666.
Here's a state by state listing of all Medal of Honor winners: http://www.homeofheroes.com/moh/states/1_states.html |
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Pecan_Creek Veteran user The Nation of TEXAS! 323 Posts |
But ours are more heroic.
And how many of those you listed were trained in TEXAS or wish they were TEXANS? Everythings better here. Our rich are the richest and our poor are the poorest. |
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silvercup Loyal user 223 Posts |
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On Aug 7, 2014, Pecan_Creek wrote: ...and the pecans rock! |
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S2000magician Inner circle Yorba Linda, CA 3465 Posts |
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On Aug 7, 2014, General_Magician wrote: That happens occasionally. I wouldn't worry about it too much if I were you. Quote:
On Aug 7, 2014, General_Magician wrote: You still haven't said what you mean by "currency risk". Understanding that is a very important point. (Note: it appears that whatever you mean by "currency risk" isn't what Morningstar means by "currency risk".) Quote:
On Aug 7, 2014, General_Magician wrote: The risk that the Morningstar article addresses is, specifically, the risk that exchange rates between your domestic currency and the currency in which your investments are denominated will change. The contracts to which you refer are currency exchange rate futures contracts; they're nothing more than agreements that at a given future date the parties will exchange one currency for another at a predetermined exchange rate. One problem here is that you're citing this guide without understanding what it's saying. Another is that you’re using the term "currency risk" (apparently) without understanding what you mean by it. It's difficult to have a meaningful discussion unless the parties agree on the meaning of the terms they’re using, and understand that meaning. |
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General_Magician Special user United States 707 Posts |
I guess what I mean by currency risk is that your native currency could devalue extensively. You never know. If you have investments in stock, the companies will eventually charge more for it's goods and services to make up for inflation or the currency devaluation. But then bonds don't do that. Your principle of your bond stays the same and if you are not invested in Inflation Adjusted US Treasury Bonds then you could rapidly lose money in your bond investments despite any interest payments. But here is the thing with Inflation Adjusted US Treasury Bonds, the US government sure came close to defaulting on it's obligations with the gridlock in Congress, so you are taking on credit risk with those bonds whereas with stock with foreign companies, you are not taking on credit risk, rather you take on currency risk. What sort of impact would it have on the US currency if the gridlock in Congress had caused the US to default on it's obligations?
Based on what you have written it sounds like interest rate, inflation and currency risks are intertwined with each other. That being said, it seems that sometimes when the US stock market isn't doing well, International stock markets are doing well. So adding some diversification to your portfolio with International investments seems to help. I don't think it's a good idea to ignore International markets and invest solely and only in US markets. Also, on the wikihow link that says simply buying some foreign currency helps with currency risk. Yet you disagree with this. Why? I mean, don't you want to mitigate some of the risks of your own native currency if it is going down in value and a foreign currency is stronger against the US dollar? Doesn't this also apply vice versa? Isn't having a diversification of currency helps to hedge the risks of the various different currencies? When one currency does bad the other is doing well?
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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Pecan_Creek Veteran user The Nation of TEXAS! 323 Posts |
If the US government defualted on it's bonds, then entire global economy would collapse. Good luck getting your money out of a foreign investment if that happened.
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General_Magician Special user United States 707 Posts |
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On Aug 7, 2014, Pecan_Creek wrote: I wouldn't try to get my money out of the investments anyway, I would probably buy more. The majority of my investment is in the US markets but 28% is in the International markets. And again, my investments are in index funds which I bought from Vanguard, a US company. More accurately a fund of index funds with two of those index funds being International. The other two being US index funds.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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tommy Eternal Order Devil's Island 16532 Posts |
Black pudding is very black today. Even the white bits are black. The world is very international today. Even the national bits are international. Since the early 1980s international markets have become increasing open and interlinked. It is technology which has increased the speed of the flow of money around the world . 24 hour trading is now routine in all spheres of financial activity. Difficult for governments to control or police things like foreign exchange, inflation , the value of their money by domestic actions. International forces are impossible to ignore today. The people can react to faster now to avoid the slow punching governments. Business, companies, even the peasants are all international today.
If there is a single truth about Magic, it is that nothing on earth so efficiently evades it.
Tommy |
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S2000magician Inner circle Yorba Linda, CA 3465 Posts |
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On Aug 7, 2014, General_Magician wrote: Extensive currency devaluation is simply inflation. If it's extensive enough, it's hyperinflation. Quote:
On Aug 7, 2014, General_Magician wrote: Just as you never know whether all of the oxygen molecules in a room will huddle in one corner and you'll asphyxiate. Theoretically, it could happen, but there's no reason to worry about it. Quote:
On Aug 7, 2014, General_Magician wrote: Or go out of business because they cannot raise their prices sufficiently. Quote:
On Aug 7, 2014, General_Magician wrote: It depends on the type of bond. Quote:
On Aug 7, 2014, General_Magician wrote: If you're concerned about high inflation, then inflation-protected securities are an appropriate investment. Quote:
On Aug 7, 2014, General_Magician wrote: The US didn't come close to defaulting on its bonds; what you saw was a lot of grandstanding. Everyone in Congress knows how to play the political game, and they'll push until the eleventh hour to try to get their pet projects approved, but they're not going to allow the US to default. Period. I see that you now agree that investing in securities denominated in other currencies adds currency (exchange rate) risk, rather than hedging it. We're making some progress. That's a good thing. Quote:
On Aug 7, 2014, General_Magician wrote: Nor do I. I've written more than once here that investing in foreign securities has diversification benefits. Quote:
On Aug 7, 2014, General_Magician wrote: Once again, it can if you're concerned with high inflation (and you're able to convert the foreign currency back to domestic currency when you need to, which isn't guaranteed), but for normal situations you're adding exchange rate risk with little benefit. If the foreign currency appreciates with respect to your domestic currency you gain, but if it depreciates you lose. (And you always have to pay the currency dealer the bid-ask spread, so on that front you always lose.) Quote:
On Aug 7, 2014, General_Magician wrote: If there were a steady decline in my domestic currency – high local inflation – I would want to mitigate the effect of that. I don't see that happening to the USD, so I'd be paying a premium (that pesky bid-ask spread I mentioned above) with no expected benefit. Quote:
On Aug 7, 2014, General_Magician wrote: Yes: if the USD depreciates vis-a-vis the EUR, then the EUR appreciates vis-a-vis the USD, and vice versa. Unless you're gifted at picking which currency will appreciate against your domestic currency – and I'm most definitely not – then you’re gambling, and paying (the bid-ask spread) for the privilege. |
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S2000magician Inner circle Yorba Linda, CA 3465 Posts |
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On Aug 7, 2014, General_Magician wrote: The point is that eventually you'll need to convert back to USD to be able to use the money in Atlanta. You cannot buy anything in Atlanta with euro, yen, real, bhat, Swiss franks, Aussie dollars, or British pounds. |
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tommy Eternal Order Devil's Island 16532 Posts |
If I was in Atlanta selling something, then I would accept British pounds for it, just because I am that kind of guy.
If there is a single truth about Magic, it is that nothing on earth so efficiently evades it.
Tommy |
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General_Magician Special user United States 707 Posts |
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The point is that eventually you'll need to convert back to USD to be able to use the money in Atlanta. You cannot buy anything in Atlanta with euro, yen, real, bhat, Swiss franks, Aussie dollars, or British pounds. Usually when markets are down or some sort of economic disaster strikes, I see opportunity and like to take advantage of lower stock prices and buy more. I don't like to sell my holdings or try to get them out of the market UNLESS my investments in the market have met the goals I have set for myself, only then would I MIGHT sell and get my money back. But that also depends on the goal I am investing towards. If it is retirement, I would try to shift those assets to produce income and hopefully have a sizable income generated constantly from that asset shift, ideally, without having to sell any securities to get that income (though that might not be possible). I agree with your definition of currency risk now that you have explained it better and I have a slightly better understanding (though most of what you explained I already knew, just that I didn't know technically that you don't take on currency risk until you buy foreign stock, bonds or just simply buy foreign currency, which you are doing anyway when you buy foreign stocks and bonds). It seems though that currency, inflation and interest rate risk are intertwined with each other. As far as the possibility of a US default, I wouldn't be so sure if it was just mere grandstanding. Never under-estimate the stupidity and incompetence of politicians. The stupidity and incompetence of politicians know no bounds. That gridlock could have very well ended in default with serious economic consequences. Fortunately it didn't though.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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General_Magician Special user United States 707 Posts |
S2000,
Check this out from "The Intelligent Investor" Quote:
Intelligent Investor wrote: The book then goes on to suggest Inflation Adjusted US Treasury Bonds and Real Estate Investment Trusts as effective ways of combating inflation though not even REITs are fool proof from inflation and with Inflation Adjusted US Treasury Bonds you carry credit risk. However, it warns that with Inflation Adjusted US Treasure Bonds you want them in a tax advantage account, otherwise, the bond's inflation adjustments to it's principles will be taxed by the IRS. Now here is a question S2000, can a wide diversification into International stocks and bonds provide some hedge against inflation at home when inflation is high? I think that's another advantage of well diversified investments in various International Stocks and bonds, is that when you buy these investments, you buy various foreign currencies which can act as a hedge against inflation at home during high inflationary periods. According to the Intelligent Investor, buy domestic stock does not always protect your asset purchasing power from the risk of inflation. See for me, in my investment portfolio, I have to minimize the number of funds I have to keep my administrative costs down so that I can still make money, so the fund I chose was a fund of index funds (which means I get charged for one fund on my administrative costs rather than several different funds such as an Inflation Adjusted US Treasury Bond Fund or an REIT Index fund, having these additional funds would increase my annual administrative costs for my 401(k) account and I didn't see any fund of index funds offering TIPS or REIT index funds so the one I chose was the best choice I had that could best manage the risks I face as an investor), which minimizes my fund costs and minimizes my administrative costs, plus offers International investments in foreign stock and bonds . By buying those International Index funds (or by buying into this fund of index funds I am buying two International Index funds as well), one being an index fund for bonds the other being an index fund for stock, I am also buying foreign currency. It would seem the foreign currency can act has a hedge against high inflation back home with the US currency and because that high inflation devalues the US currency and makes it more difficult for companies to make a profit back home. But this might not be the same problem being faced by International markets at the same time.
"Never fear shadows. They simply mean there is a light shining somewhere nearby." -unknown
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