Forex Diversification

[perfect_simulation]

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?

[Mark Leavy]

Your 25% gold represents an amalgam of world currencies. Not exactly, but that is how it reacts in the short term against the dollar.

[Hal]

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

[Smith1776]

Or you could join "The Sect of Smith" and implement the GoldSmith portfolio

[Vil]

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).

[doremoreguy]

Keeping some exposure to the Euro (through something like FXE) and Canadian Dollar (via FXC) makes sense, given their roles in the global market. The dollar still holds strong as a reserve currency, but having a bit of variety can help balance things out.
If you're actively trading while doing this, you might want to look into a Fast Track Trading Discount Code. It's helped me cut down on fees, which is always nice when you're trying out different strategies.

[ochotona]

I just sold my short-term corporate bonds, which I considered to be "nearly cash", and bought FXF the Swiss Franc ETF. I didn't want to hold the currencies of jurisdictions that have economically weak nations in them (many Euro States, also UK) or have unique exposure to "geopolitical risk" (NATO States, Canada).

Question... HOW FAR WILL THEY LET TTHE US DOLLAR SLIDE? 90? 80? In 2008 it touched 71 !

[seajay]

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?

The IMF last set SDR's to be comprised of the order 43% US dollars, 29% Euro, 12% Yuan, 8% each of Yen and Pounds Sterling. The US has thrown out much trust/safety and with gold now being a Tier 1 many are looking for something like the order of gold being a 33% element of that sort of weighting/choice, alongside with reductions in (de-risking relatively high) USD, perhaps something of the order 32% gold, 20% Dollars, 20% Euro, 12% Yuan, 8% in each of Yen and Sterling. Which somewhat also aligns with others i.e BRICS/BRICS-Pay (as a alternative to US controlled SWIFT). In that context that would entail considerable levels of selling of US Dollars/Assets. The former rise of the dollar being a dominant international trade currency arose in part due to moving physical gold around being more laborious/costly than shifting dollar digits. With the rise of digital gold/tokens (open/public blockchain) that is a more trivial matter.

Trumps 10% general tariffs choice is somewhat similar to the EU's VAT taxation/system, but where with VAT that can be reclaimed when EU goods are exported outside of the EU (so Americans for instance don't pay it when they import goods from the EU), but where it is added when goods are imported into the EU (so American goods for instance are higher cost after imported into the EU). With Trumps tariffs unlike the EU where VAT is paid by all internally in effect Americans don't pay that 10% if the goods were 100% domestically produced/sourced, but like for like that is relatively little different to if imported from the EU by the time you factor in lower EU wages compared to the US and that many domestic produced end products may include elements of imported component parts.

All seems odd. Trump is throwing out trust/allies - potential decline in the dollar/stock prices, in return for ... relatively little. More so when you factor in that the USD was the dominant currency that facilitated the US exporting inflation. With increased need to be more competitive what new jobs may be repatriated are inclined to be low paid, US machinist/shirt makers competing with EU/Asia machinist/shirt makers and suchlike.

Tariffs however are a quick means to generate tax revenues, which facilitates reducing other taxes, pay more for stuff, but where taxes on wages might be reduced.

The last time that the US transitioned from 60% of total global market cap down to 25% - as a consequence of the rise of Japan (1970's when Sony/Yamaha etc. became global household names) that was pretty dire for the dollar and US stocks. The subsequent re-rise of the dollar arose more out of Japanese failures. This time it could be a dip/dive and remaining relatively down.

The trick is perhaps to simulate something like SDR+gold, diversifying across multiple currencies and gold/silver rather than relying upon a single case alone. A 5% weighting however would hardly make any difference - other than in more extreme situations.

[seajay]

Trump is very binary, sees things as win or lose only and as such is opting to cast out agreements that he opines aren't a sole present day binary US win situations. Any world leaders that simply disregard former international promises/agreements raises the level of distrust. Many for instance see any Russian agreements/deals as being pretty much meaningless as Putin has repeatedly broken/disregarded promises/agreements.

https://www.kitco.com/news/off-the-wire ... llar-shock

April 29 (Reuters) - The U.S. dollar has suffered its worst start to any year since 1989 as the Trump administration has put forward once unthinkable economic policies, unnerving global investors.

But one proposed shift would be of a different order altogether: an exit by the U.S. from the International Monetary Fund.

But the impact of an IMF exit on the greenback would go far beyond frayed trust or investment rethinks. That's because this step - openly advocated by the controversial "Project 2025", conservative wish-list for President Donald Trump's second administration - would mechanically unravel overseas dollar reserve holdings.

the dollar would be excluded from use by the fund if the U.S. were no longer a member, raising the question: "What nation would want to hold assets in a currency that cannot be used in IMF transactions issued by a country that has abdicated its international financial responsibilities?"

"Withdrawal from the IMF would spell the end of America's status as the principal reserve provider to the rest of the world," Truman wrote.

The exchange rate implication of that could be huge.

While a dollar devaluation on that scale may be welcomed by many administration advisers who see it as another way to regain global competitiveness for U.S. goods, the big question - much like higher import tariffs - is whether that is worth the price of massive U.S. financial disruption.