Weakening US Dollar

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Jul 14, 2007 9:07 pm

[quote=deekay][quote=snaggletooth][quote=deekay]

Seriously?  How does that figure into you gathering AUM?  I'll give you a hint..........

Nothing.

[/quote]

So I suppose you don't have an opinion on this economic matter. 

I most certainly do.  I think the economy will grow in the future.  Does it matter in the long run?  Absolutely not.  I tell this to my clients.  They appreciate the fact that I don't try to predict the future. 

How does your replying to the post figure into you gathering AUM? 

I thought you were a wirehouse rep.  Isn't that your job?

I'm sitting at home watching some baseball on TV and thinking about the economy, so I have a question and I post it on here, and I get your stupid uneducated reply.  If I was in the office or somewhere in the middle of a bunch of prospects, then you're right, posting a message on an RR forum board might not help to gather assets...BUT I'M AT HOME ASSHOLE.  If one of your clients or prospects asks you about your opinion on the economy and the U.S. dollar, what do you say, "Sorry, I can't answer your question because it doesn't involve me gathering more assets under management, you should know that as a client of dumb da dumb deekay financial services"

Nope.  I tell them exactly what I said above.  Who cares what the economy is doing in the next six months?  When are you retiring?  Oh, really, 15 years?  And you expect to live another 30 years in retirement?  Who the hell cares what the Euro is doing?!

[/quote] [/quote]

Thank you finally for a useful reply.  But what about when they have more of a short term goal where the economy can affect, and significantly I might add, one's return?  And by the way, I'm Independent, not at a wirehouse.

Jul 14, 2007 9:14 pm

[quote=FreeLunch]

Deekay

You are hilarious.  You bring nothing at all to this conversation.  L.O.L.

Quit joking around man - Are you brainwashed?  Are you okay?

[/quote]

I asked a reasonable question. 

What does the economy have to do with gathering AUM?  I gave my opinion.  I feel it has nothing to do with it. 

I asked how a rookie can compete with portfolio managers that run billions of AUM and have extensive research capabilities.  IMO they can't compete. 

I have an opinion about the dollar.  I hope I have enough in the future to buy the same amount of stuff that I can today.  Seriously, it's weak now and it'll strenghten in the future vs. other currencies in the future.  When?  Who the hell knows?  For that matter, who the hell cares? 

When you get to know your clients the way I know mine, they NEVER ask you about the economy.  Because, all they care about is retiring comfortably, putting their kids through college, setting up funds for their alma matter, and making sure their parents don't get shoved in a third rate nursing home. 

Don't worry about me - I do fine financially.  I don't need to compare schlong sizes with you. 

Jul 14, 2007 9:15 pm

Snaggletooth. 

A Weak dollar is going to help our goods be less expensive.  This'll generally help revenues.

Think about what companies export the most goods & what international companies are getting raw materials for cheap from the U.S.   That could really increase profit margins for them.

I like foreign steel & material stocks & I have one I really like if you want to PM me.  I don't think the FED can raise rates, personally, at least not for a while.  With the subprime deal and a lot of other problems in the financials, this could be a disaster.  Rates Need to come DOWN.

but then you have the weakening dollar.

I think, as opposed to trying to directly play it - you need to come up with a HEDGE like a foreign currency exchange rate ETF or something. 

I hope this makes sense - its a difficult topic.

Jul 14, 2007 9:18 pm

Deekay

My clients don't ask me about the economy either, that much anyway.

And to your surprise, i do have clients......and they are growing significantly.

I'm not going to lie - sometimes cold calling all day can get boring & old, so I do think about stocks, the economy, and how to position portfolio's.  Why?  It's fun & exciting.

Do you really not enjoy thinking about stocks, markets, etc.?

You don't enjoy that?  Even a little Bit?

Jul 14, 2007 9:27 pm

[quote=FreeLunch]

Deekay

My clients don't ask me about the economy either, that much anyway.

Then why do you set up your business like they do?

And to your surprise, i do have clients......and they are growing significantly.

I never denied you had clients.  I think if you focus on the things that are important to people vs. thinking how you can drag another point out of XOM you'll see your business explode.

I'm not going to lie - sometimes cold calling all day can get boring & old, so I do think about stocks, the economy, and how to position portfolio's.  Why?  It's fun & exciting.

Nobody ever went broke picking the wrong small cap manager.  However, I know many affluent families who went broke when the main breadwinner became disabled.  I won't piss on someone's hobby - your's is studying the economy.  But when you get to the root of dealing with a family, managing money is a minute part of the process.  Planning for whatever economy - personal or global - comes their way is how a FA and a client becomes successful. 

Do you really not enjoy thinking about stocks, markets, etc.?

You don't enjoy that?  Even a little Bit?

I'll admit - I used to.  But when I realized it is little more than educated guessing, I became bored with the whole process. 

[/quote]
Jul 14, 2007 9:56 pm

I don't understand what you are saying, Deekay.

I have 150 clients - less than 10% of those are stock only accounts.  I do not set up my accounts that way.

My hobby is not studying the economy.  My hobby is golf, lol.

You are assuming too much about me

I spend the vast Majority of my time prospecting and helping my clients plan for whatever their goals are.  I like to have conversations and share my opinions on whats going on.  I also like to have a good idea ready at all times.  A good financial stock, a good Tech stock, etc....     I value having good ideas - It doesn't take as much effort as you are assuming.

I'll always enjoy individual equities.  Ask me again in a brutal bear market and I might make a change like you did in '01. 

But for now, I'm comfortable thinking about it in my time off.

Jul 14, 2007 11:29 pm

Jul 15, 2007 12:52 am

[quote=FreeLunch]

Right about what?  You didn’t even answer the question.

Your answer was 100% irrelevant.

Your response would've been more appropriate if you would've said, "I don't know, snaggletooth.  I have no knowledge of the markets."

[/quote]

Your response would've been even more appropriate if you would've said, "I don't know, snaggletooth. I'll let my clients take the risk."
Jul 15, 2007 12:57 am

Jul 15, 2007 1:01 am

[quote=FreeLunch]

Snaggletooth

People like Deekay are so stupid that they don't realize it.  I think we're beating a dead horse.
[/quote]

I always tell clients I'm schizophrenic (split mind) on these issues. On the one hand dollar movements do not terribly affect clients *except* that a weakening dollar makes imports (e.g oil) more expensive and is thus somewhat inflationairy.

During highly stressed situations, the USD could weaken dramaticly, and thus it would be nice to have non USD assets. Under normal circumstances Forex fluctuations are random noise.

I remind clients that about 50% of the return from x-US investing over the past few years comes from the USD weakening vs the rest of the world. So don't get too excited.

Net result is that core equity for a fully passive portfolio should be about 50% US and 50% x-US. Given that most people in the US are highly exposed to the US economy, they should have a good chunk of their assets not exposed to the US Economy (e.g Bonds, x-US equities, TIPS, long life hard assets etc).

My $0.02,

Jul 15, 2007 2:14 am

Jul 15, 2007 3:12 am

[quote=joedabrkr]

[quote=AllREIT]

I remind clients that about 50% of the return from x-US investing over the past few years comes from the USD weakening vs the rest of the world. So don't get too excited.

Net result is that core equity for a fully passive portfolio should be about 50% US and 50% x-US. Given that most people in the US are highly exposed to the US economy, they should have a good chunk of their assets not exposed to the US Economy (e.g Bonds, x-US equities, TIPS, long life hard assets etc).

My $0.02,

[/quote]

With that in mind, do you REALLY think it's a good idea to have so much core equity ex-US?  Especially since so many of the talking heads think it's a good idea right now?

Food for thought.
[/quote]

For a fully passive portfolio yes. From a tactical perspective probably not, and mostly because USD/x-US currency effects will drag on the outperformance of x-US relative to the us economy.

If there was a hedged ETF, that would be very very cool.
Jul 15, 2007 6:45 am

to answer your question:

Traditional vehicles like gold are often used to counter a weakening dollar. Look for companies that manufacture domestically but export their products for retail. Ironically domestically produced luxury end items are often a solid play since they become less expensive to European and Asian retailers.

Any hedge on currency pairs of interest such as Euro/Dollar or Dollar/Sterling are also a way to go however the leverage makes this more your clients that like a portion of their portfolio in ultra high risk.

There are of course currency funds available that kill the volatility enough to be considered more growth vs. aggressive.

It is also a good idea to identify which banks in which countries are buying up dollars. Pay attention to their macroeconomic data such as farm reports, housing starts and employment numbers. This will help you in selecting any foreign investments with an emphasis on a mid to long term weakening of the dollar.

Jul 15, 2007 6:47 am

[quote=DJRoss]
Any hedge on currency pairs of interest such as Euro/Dollar or Dollar/Sterling are also a way to go however the leverage makes this more your clients that like a portion of their portfolio in ultra high risk.

[/quote]

should say “…the leverage makes this more a vehicle for your clients…”

Jul 15, 2007 1:18 pm

[quote=DJRoss]to answer your question:

Traditional vehicles like gold are often used to counter a weakening dollar. Look for companies that manufacture domestically but export their products for retail. Ironically domestically produced luxury end items are often a solid play since they become less expensive to European and Asian retailers.

Any hedge on currency pairs of interest such as Euro/Dollar or Dollar/Sterling are also a way to go however the leverage makes this more your clients that like a portion of their portfolio in ultra high risk.

There are of course currency funds available that kill the volatility enough to be considered more growth vs. aggressive.

It is also a good idea to identify which banks in which countries are buying up dollars. Pay attention to their macroeconomic data such as farm reports, housing starts and employment numbers. This will help you in selecting any foreign investments with an emphasis on a mid to long term weakening of the dollar.

[/quote]

Thanks DJ, some pretty insightful stuff!  Appreciate your response.

Jul 15, 2007 5:03 pm

Just my 2 euros:

I've read some of the doomsday scenarios presented in books and blogs. In fact, I'm an avid reader of "BEAR"-oriented websites; such as, www.prudentbear.com and www.safehaven.com .

However, while I agree that the U.S. has a problem; i.e., the large inventory of Treasury securities held by foreigners (especially the Red Chinese), the large amount of U.S. consumer debt vs. income, the housing problem, the continued reduction of U.S. manufacturing capacity, etc.; I don't believe it's all going to come crashing down in one fell swoop. The politicians won't allow it. They'll print more money, if they have to, in order to ease the transition.

For these reasons, I believe that the dollar will continue to depreciate. Therefore, I have higher allocations of assets in securities that have historically performed well in such situations.

An easing dollar may make U.S. exports cheaper, but with a rapidly decreasing manufacturing sector, we won't see much of a benefit.

Also, gas will continue to go up, given a cheaper dollar. What about ethanol? Ethanol is a scam. It takes approximately 1 gallon of imported oil to make 1 gallon of ethanol. So, the savings are...?

What about our "low" inflation rate? The CPI measurement underwent some "modifications" during the Clinton and Bush Administrations, as did the way unemployment is measured. I prefer to use the measurement methods last used in the '80's and applied to today's situation. (Hint: my revised CPI and unemployment numbers are much higher than that reported by Uncle Sam.) I base client asset allocations on these revised numbers.

All in all, I forecast a continued weaker dollar, higher inflation, and larger government deficits.

Jul 15, 2007 5:09 pm

The simplest way to play out this idea if you have conviction in your thesis is to allocate a small percentage of money to a fund like Franklin Templeton Hard Currency (ICPHX).  IMHO, The Fed is not nearly as potent as it used to be and raising short-term rates is not the key to giving the dollar a boost.  A normalized yield curve with higher long-term rates is key.  Then the sh*t will really hit the fan in the real estate and housing markets.  I think this process has already started, and will continue for quite some time (2-3 years).  The global margin call has begun… 

Jul 15, 2007 6:11 pm

Oh man, I just realized I jumped into this discussion last night.  This was my first 'PWI' offense (posting while intoxicated)  

I apologize for any offense I may have caused.  FTR I feel that trying to time the direction of currency is a losing proposition.  If you properly diversify a client, you shouldn't have to worry about it.  I may be wrong but that is how I feel.

If I offended anybody (I realize I may have come off a bit harsh and holier-than-thou), I apologize.

Jul 15, 2007 6:42 pm

well I apologize then too you alcoholic basturd.

Jul 15, 2007 6:57 pm

[quote=deekay]

Oh man, I just realized I jumped into this discussion last night.  This was my first 'PWI' offense (posting while intoxicated)  

I apologize for any offense I may have caused.  FTR I feel that trying to time the direction of currency is a losing proposition.  If you properly diversify a client, you shouldn't have to worry about it.  I may be wrong but that is how I feel.

If I offended anybody (I realize I may have come off a bit harsh and holier-than-thou), I apologize.

[/quote]

At least admittance is the first step towards recovery.  No offense taken.  I'd say we should just start a thread that you could ONLY post on when you're wasted, it might get pretty entertaining to say the least