http://www.marketwatch.com/story/currency-etfs-let-investors-hedge-weak-dollar-2009-09-18
I am looking at buying futures of a commodity or currency as a hedge. The futures contracts are less money than actually trading one currency for another. I need to do this as I may be relocating to Europe but will be earning income in dollars.
But I would caution drawing the conclusion of the demise of the dollar. Currency trading long term movements are driven in large part by economic growth and security. Other currencies do not have a better model than the US, in the sense of growth and security. It does not mean the US is growing, it is not. It’s just that other economies are doing poorer.
China has claimed growth but they are a mess in the reality of their society. They can’t afford to allow too much devaluation in the dollar because their sweat shop industries depend on the US consumer. And if they are successful trading dollars for gold or Euros or whatever, they will see those holdings be subject to downward economic forces as well.
Brazil holds promise but is not viewed as having the financial infrastructure to step into the US shoes.
Everyone is weak now. And the USA will be weak for three more years because the current President is not gearing up to promote growth but rather socialism.
This would be the time for other countries to make transformational moves but they are all weak. The recent spector of Saudis, Chinese, Russians etc. finding a currency to replace the dollar in oil trading is not well thought out. They have no real economic basis for profiting from such a move. They seek a stable currency tied to oil. Well oil prices are not stable so it’s a dumb move. It is essentially a primitive form of international political grandstanding.
What is needed to pull the world out of this deflationary cycle is for the US to lead in economic growth. That can only happen when the current White House occupant is replaced and the Congress passes major tax reform. No other country will be able to pull the world economy out of its downward spiral.
Big Ben should be hearing the siren. Offering little to nothing on CDs and the dollar losing value is a recipe for change. The elderly who rely on interest income are hurting. Basically savers are paying for the Bank Bailouts.
any short-term or long-term gains in the ETFs due to currency moves are taxed at the ordinary rate up to 35%.
Thanks for your insight