Gyroscopic Investing

Posted: **Fri May 10, 2013 3:07 am**

I started a new PP on april 1st. It is 60%-40% domestic/international and is denominated both in ILS (domestic) and international (USD) currencies.

It looks like this:

Stocks - VT (15%) - USD
Israeli stock market ETF - 10% - ILS
Gold - ZGLD US (22%) - USD
IAU (3%) - USD
Bonds - Bank of Israel January 2042 (25%) - ILS
Cash - Israeli equivalent of t-bills (25%) - ILS

Unsurprisingly this portfolio is doing quite poorly at the moment (due to recent gold crash and bad performance of the local stock market).

My main concern is the foreign currency issue, which has exacerbated my losses on gold.

As we all know the USD is weakening globally; The problem is that due to macroeconomic events (low debt/GDP ratio, recent discovery of huge natural gas reserves), my domestic currency (ILS) keeps going stronger and stronger compared to other world currencies.

This is ostensibly a good thing for me as an Israeli with large ILS reserves, but it ultimately hurts my PP. On April 1st you needed 3.64 ILS to buy 1 USD, and now you only need 3.55 ILS. This trend is set to continue and current estimates set 1 USD to be worth just 3.40 ILS or less.

What are some good ways I can implement to hedge against such currency risk?

Posted: **Fri May 10, 2013 7:45 am**

I wouldn't change anything. The strengthening ILS is helping your domestic bonds and stocks, even though it won't show up in the CAGR when priced in ILS. You could track your PP in USDs for a comparison.

If you hedge now then you are betting that your currency will continue to strengthen, which may or may not be the case (central banks are no fans of a strong currency).

Your portolfio looks balanced enough to handle a falling or rising ILS.

Posted: **Fri May 10, 2013 9:09 am**

Your portfolio has nothing to do with USD beyond ~7% that you have invested in US market (approximately half of VT) - even these 7% are not really USD - you just own 7% of US companies and your portfolio looks very good IMO.

Posted: **Fri May 10, 2013 1:01 pm**

Looks good to me. Don't obsess over short term movements in the markets or your PP. It's not a Swiss watch where all the gears move in tandem. Over time it should give a nice smooth ride.

Posted: **Fri May 10, 2013 2:52 pm**

catacomb wrote: As we all know the USD is weakening globally...

Really?

Compared to what?

Posted: **Fri May 10, 2013 9:39 pm**

MediumTex wrote:
catacomb wrote: As we all know the USD is weakening globally...
Compared to what?

Some emerging market currencies I suspect.

Posted: **Sat May 11, 2013 11:11 am**

escafandro wrote: Some emerging market currencies I suspect.

Which ones?

Posted: **Sat May 11, 2013 8:34 pm**

AdamA wrote:
escafandro wrote: Some emerging market currencies I suspect.
Which ones?

I live in South America, don't know other places.
https://www.google.com/finance?chdnp=1& ... tGTwQPywgE

Gyroscopic Investing

Weakening dollar is hurting my PP - How should I hedge against it?

Weakening dollar is hurting my PP - How should I hedge against it?

Re: Weakening dollar is hurting my PP - How should I hedge against it?

Re: Weakening dollar is hurting my PP - How should I hedge against it?

Re: Weakening dollar is hurting my PP - How should I hedge against it?

Re: Weakening dollar is hurting my PP - How should I hedge against it?

Re: Weakening dollar is hurting my PP - How should I hedge against it?

Re: Weakening dollar is hurting my PP - How should I hedge against it?

Re: Weakening dollar is hurting my PP - How should I hedge against it?