No. of Recommendations: 8
FXB or FXE or FXC
just as soon as I might put some cash into these, the dollar will strengthen. Given my track record.
For conceptualization purposes, holding the above (as opposed to t-bills / short term US gov’t bonds, say) would essentially be a bet that the dollar will continue to weaken. Is that fair, or too reductive a way of looking at it?
Putting all your money into those (or a similar broad mix) would be the stance that you don't trust the US dollar. It isn't a bet *against* the US dollar, since a rising dollar wouldn't hurt you. You'd merely be expressing the view that you don't wish to be bullish on the dollar so you abstain.
I think the best way to think of it is that a person with cash that they want to preserve, but without a strongly held forecast, should have a broad mix of major currencies. Anything other than a broad mix is a wager on the rising or falling of some of them, and who is that smart? So, sticking all your money in US dollars as a habit is subconsciously making a high confidence wager. Putting some other currencies in your portfolio isn't making a new bet, it's cutting back a bit on the one you're already making. Personally I'm holding a mix of British pounds, euros, Canadian dollars, and relatively few US dollars largely related to my derivative positions. (no particular order)
The safest thing I can think of is a broad mix of government issued inflation protected bonds in a mix of major currencies. This corresponds to the position that isn't making any call on the trajectory of inflation or FX rates, and takes no counterparty risk.
Jim
