You gotta love a country that puts Tenzing Norgay on its $5 bill.Early today (or late yesterday if you prefer) the Reserve Bank of New Zealand raised its fed funds equivalent to 8% from 7.75% in a move that was sort of a surprise; not a total shock but not really expected either.
The day before, Australian GDP came in at 3.8% which was way above the expected 3.1%. These news items have sent both the Kiwi and the Aussie higher against the greenback as things seem to be cooking down under. Some of the other high yielding deficit countries (like Turkey and Iceland) have also had favorable data which has helped those currencies too.
Its a risk taker's paradise!
It seems like the currency market has a different take on the world than equities and bonds. So who's right? Unfortunately whichever market is correct now might be incorrect in a month so devoting too much this may not be too productive.
What we know (this is really just my opinion despite the declarative nature of the statement) is that many other countries are at different points of their economic cycles and so are still expanding; most of these places are commodity beneficiaries or in their own worlds. These countries' markets will likely go down in sympathy with the US market on a short term basis, as has been the case in the recent past.
However I don't feel these sympathetic declines are fundamentally justified. If this is true then being invested in these countries, where sympathetic declines are not justified, can put the odds in your favor for better risk adjusted returns. To be clear not fundamentally justified doesn't have to mean anything, investment in these countries guarantees nothing but I do think they give a better chance.
For anyone new, the countries I have in mind here are Australia, Norway, Sweden and Canada among others.
5 comments:
How does one go about purchasing Norwegian currency? Can you do it on any of the US exchanges?
You once mentioned that you owed shares of the London Stock Exchange. Where did you buy those?
re foreign stocks: most brokerage firms have some access to foreign stocks. Some will be better than others and each will likely have their own procedure. Schwab seems decent but other readers have had good things to say about Interactive Brokers. I have no first hand knowledge about them though.
re currency: I own a two year gov't bond from Norway for some clients that I bought through Schwab which creates a currency effect though not a pure as just buying the currency.
among others Everbank offers the ability to buy currency, $10,000 the last i checked, this is in addition to less liquid CDs that the offer too.
FYI: The picture on the NZ $5 bill is actually Sir Edmund Hillary who first climbed Mt. Everest with Tenzing Norgay.
um, i was making a joke.
guess it went over like a lead balloon. oops
OK, now I get it!!!
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