Thursday, July 05, 2007
This is the list of currencies I have on MyYahoo page.
Of late, and this has gotten some attention, the dollar has sold off in a big way against a lot of other currencies.
This tends to belie a willingness in the market place to take more risk. The AUDCHF, the second from the bottom, which some view similarly to the old TED spread, has moved dramatically in the favor of the Aussie.
A year ago AUDCHF was around 0.92, so it has moved 13% to get to 1.04.
The US dollar is down against all sorts of deficit currencies like the Aussie and kiwi and it has also lost ground to the surplus currencies like the Norwegian krone and Swedish kroner.
The dollar is also down against just about every emerging market currency you can think of too, not all of them but most.
The portfolio implication is unclear in that you can find plenty of smart folks that can lay out a compelling case about how a weaker dollar helps our economy, helps exports and so on but I don't really buy into this idea. I think its more like a weaker dollar is not 100% bad which is a long way from saying it is a good thing.
I heard Peter Schiff on one of the shows on Tuesday (Kudlow?) calling for the same collapse he has been calling for every time I have ever heard him speak. While I don't think much of always predicting the same very extreme outcome the more important part of his message get thrown in as an after thought; buy foreign stocks.
The US market has lagged most other markets in local terms and the outperformance magnifies when you factor in you get an extra 8% from the Aussie dollar and 6% from the Norwegian krone (as two examples of countries I have been writing about for several years).
Being in touch with big macro trends like this makes investing much easier. The simple decision to go foreign has been very important and seems very likely to continue to be very important.