Here’s an answer to the investing question from my brother, a brainiac attorney with a masters in computer science, a law degree from one of the top law school and who worked on Wall Street before coming to SD. He also reads an hour or two every day, economics and politics.
He recommends diversifying in a porfolio of commodities and East Asian and European mutual funds. If the yen goes up, so wil the East Asian funds. If the euro goes up, so will the European mutual funds. When the dollar falls, all three will go up. This way, you are betting against the dollar on top of making good investments.
Warren Buffet is making his new investments outside the US. He bought an Israeli company. So people who believe the dollar will fall, invest in non-US companies.
My brother and I disagree on whether the anticipated reduced US consumption will effect Asian and European stocks. He says Asia doesn’t need us; they’re selling us goods in exchange for IOUs, worthless paper (Tnotes). Since they’re not converting our dollars to their currency, they are not getting paid anyway. So when the US consumer slows down on Chinese goods, the Chinese will selling those goods to themselves. This does make sense, but if they don’t need us, then why do they continue selling to us with these supposed worthless dollars?
A reason that stocks/equities globally can decline somewhat in the next 6 weeks has to do with the yen carry trade. some guess that the Japanese carry trade, which put $200 bil of liquidity into the system and is unwinding by end June 2006, was used to buy equities and bonds. As these positions are liquidated between 3/06 and 6/06, the equity and bond markets where the investments were made, will go down. You can read more at atimes.com. They wrote that “the end of quantitative easing will pull an enormous amount of liquidity from Asian and US stocks and bonds, prompting widespread asst price depreciation and yen revaluation”.
Have you talked with Chris J about trading bond futures? I just subscribed to his service. You make 1-2 trades per week. Get in, hold for several days, get out. He makes his living at this, and has done well. Check out his blog.
I would love to know some good ideas for investing. I have made many posts about this, but don’t get many responses. I’m glad you are bringing up this topic.
