Forex Diversification

Discussion of the Cash portion of the Permanent Portfolio

Moderator: Global Moderator

Post Reply
perfect_simulation
Associate Member
Associate Member
Posts: 27
Joined: Mon Aug 17, 2020 4:04 pm

Forex Diversification

Post by perfect_simulation » Sun Jan 24, 2021 11:35 am

of 25% cash, I am considering keeping 5% in different currencies. I couldn't find any HB thoughts on this, he advocated the dollar because of its reserve status. The Euro is considered to be the 2nd reserve currency, and you can pick up shares of FXE to get Euro exposure. And maybe some FXC for Canada.

Any thoughts?
User avatar
Mark Leavy
Executive Member
Executive Member
Posts: 1536
Joined: Thu Mar 01, 2012 10:20 pm
Location: US Citizen, Permanent Traveler

Re: Forex Diversification

Post by Mark Leavy » Sun Jan 24, 2021 11:49 am

Your 25% gold represents an amalgam of world currencies. Not exactly, but that is how it reacts in the short term against the dollar.
User avatar
Hal
Executive Member
Executive Member
Posts: 901
Joined: Tue May 03, 2011 1:50 am

Re: Forex Diversification

Post by Hal » Sun Jan 24, 2021 2:46 pm

HB touched upon that briefly in his radio show. He stated if there was high inflation in the USD, funds would move into Gold, which is a much smaller market, and would more than offset the losses.

He also advised an Indian caller that if the economy went bust in India, the Indian PP holder would still have his Gold. The way it was said implied Gold would not cover the losses as it would in the USA.

So..., if you are a non-US resident and wish to diversify currencies, I would suggest doing that with the USD.
Have a read of some of Smithy's posts. He lives in Canada and faced the same issues.

Or you could join "The Sect of Smith" and implement the GoldSmith portfolio ::)
Aussie GoldSmithPP - 25% PMGOLD, 75% VDCO
User avatar
Smith1776
Executive Member
Executive Member
Posts: 2274
Joined: Fri Apr 21, 2017 6:01 pm

Re: Forex Diversification

Post by Smith1776 » Thu Jan 28, 2021 12:30 pm

Hal wrote:
Sun Jan 24, 2021 2:46 pm

Or you could join "The Sect of Smith" and implement the GoldSmith portfolio ::)
O0 O0 O0 O0 O0 O0
"Talk is cheap. Show me the code." - Linus Torvalds
User avatar
Vil
Executive Member
Executive Member
Posts: 252
Joined: Wed Jan 01, 2020 10:16 am

Re: Forex Diversification

Post by Vil » Thu Jan 28, 2021 3:58 pm

perfect_simulation wrote:
Sun Jan 24, 2021 11:35 am
of 25% cash, I am considering keeping 5% in different currencies.
...
Any thoughts?
Not really sure those 5% would make any notable difference (unless you decide to diversify with Zimbabwean dollars ..). Personally, I am keeping 2:1 as ratio of EUR:USD holdings (EUR being my native currency). While someone can say that's a pretty active bet, what is not (even going on with PP is a sort of)?
Regarding Gold serving as a basket of world currencies, I am not truly convinced it is, for me it looks more of anti-USD than anything else.. although China and Russia are consistently buying gold over the past years as they look to diversify away from the USD/treasuries. Regarding the size - haven't seen any new figures lately, but a year ago the aggregated Gold market was valuated for slightly less than $10tn (measured by spot prices back then).
Post Reply