Some Things We Can Learn from The Week Ending 5/27/2016
This week provided these tidbits:
Currencies
Has the US dollar finally peaked? It was falling relative to other currencies and was a big part of the rally in emerging market stocks these last couple of months. But now it's strengthening again. Taking a longer-term perspective, we ask: Is it generally going to continue over, let's say, the next year or more relative to other currencies? No definitive answer yet. But here's what you might considering doing in either case.
Dollar peaked:
This calls for diversifying out of the USD in any cash you hold as part of your investment allocation. (And yes, this means that cash can and frequently should be part of your investment allocation.) So rather than stick with just US dollars, you'd hold other currencies by selling some of your USD and buying, for example (in no particular order or weight): the Canadian Dollar, the Yen, the Euro, Australian Dollar, British Pound. Notice we're considering only major currencies here, not Thai Bhat, Russian Rubles or even for that matter the Chinese Yuan (not yet anyway).
Dollar maybe peaked long-term, but in the short/intermediate term it's going to strengthen:
Here you may consider moving to those other currencies - but not yet. You look at this chart and see that in May, the dollar, after tumbling since February, has reversed itself.
Longer term charts of the dollar might argue that it's basically been "topping" since it peaked in October last year. But there's no clear pattern yet that tells us that's the case.
So maybe putting a "Watch List" of those other currencies together might serve the purpose of preparing you to pull the trigger when the longer trend becomes clearer. This way you don't get caught in an extended period of USD strength where you lose money on your cash by being in those other currencies. And if the longer trend more clearly manifests itself as downward, you'll have time to diversify.
Gold
Now that gold has decided to finally take a rest after its steep ascent this year, the lesson here would be sticking with what you know based on patient observation. Over the years, it's become clear that nothing grows to the sky. And gold was looking that way until a couple of weeks ago. As for the mining companies that extract gold from the ground, their ascent was even more dramatic and the sky was literally the limit for a while there - or so it seemed. Indeed, each time the miners "should have corrected," they turned right around and ascended to yet another level. So while we really did want to add to our positions (and didn't when gold and the miners bottomed in mid-January), we simply figured that unless the world were ending, the sky would likely prove elusive to these precious metal twins. And so it seems this week we were wise to wait - at least for now.
Personal
Memorial Day weekend has arrived. Such extended weekends come for a reason. Just like Sunday is the Lord's Day, and therefore a day of rest from physical labor (or should be in a rightly ordered world), so these long weekends present the opportunity to ease up, rest the body, clear the mind, maybe spend extra time with family and friends at one of those Memorial Day weekend barbecues. For years, I took the extra time as in invitation to either catch up on work that was pressing, when clients were otherwise occupied. Or maybe as a chance to tackle some problem that wouldn't respond to the normal time and energy of the work week. Fortunately, though, I've learned that filling up these occasional extended respites with work really yields minimum benefit and robs you of enjoying either time off or the company of loved ones - ideally both. And so it shall be this Memorial Day weekend.
Of course, a prayer of thanksgiving for those who gave their lives defending our country should be part and parcel of your thoughts and activities this weekend. Consider what you have now as the fruits of the ultimate sacrifice made by so many then. God bless them...and God bless America!
Currencies
Has the US dollar finally peaked? It was falling relative to other currencies and was a big part of the rally in emerging market stocks these last couple of months. But now it's strengthening again. Taking a longer-term perspective, we ask: Is it generally going to continue over, let's say, the next year or more relative to other currencies? No definitive answer yet. But here's what you might considering doing in either case.
Dollar peaked:
This calls for diversifying out of the USD in any cash you hold as part of your investment allocation. (And yes, this means that cash can and frequently should be part of your investment allocation.) So rather than stick with just US dollars, you'd hold other currencies by selling some of your USD and buying, for example (in no particular order or weight): the Canadian Dollar, the Yen, the Euro, Australian Dollar, British Pound. Notice we're considering only major currencies here, not Thai Bhat, Russian Rubles or even for that matter the Chinese Yuan (not yet anyway).
Dollar maybe peaked long-term, but in the short/intermediate term it's going to strengthen:
Here you may consider moving to those other currencies - but not yet. You look at this chart and see that in May, the dollar, after tumbling since February, has reversed itself.
Longer term charts of the dollar might argue that it's basically been "topping" since it peaked in October last year. But there's no clear pattern yet that tells us that's the case.
So maybe putting a "Watch List" of those other currencies together might serve the purpose of preparing you to pull the trigger when the longer trend becomes clearer. This way you don't get caught in an extended period of USD strength where you lose money on your cash by being in those other currencies. And if the longer trend more clearly manifests itself as downward, you'll have time to diversify.
Gold
Now that gold has decided to finally take a rest after its steep ascent this year, the lesson here would be sticking with what you know based on patient observation. Over the years, it's become clear that nothing grows to the sky. And gold was looking that way until a couple of weeks ago. As for the mining companies that extract gold from the ground, their ascent was even more dramatic and the sky was literally the limit for a while there - or so it seemed. Indeed, each time the miners "should have corrected," they turned right around and ascended to yet another level. So while we really did want to add to our positions (and didn't when gold and the miners bottomed in mid-January), we simply figured that unless the world were ending, the sky would likely prove elusive to these precious metal twins. And so it seems this week we were wise to wait - at least for now.
Personal
Memorial Day weekend has arrived. Such extended weekends come for a reason. Just like Sunday is the Lord's Day, and therefore a day of rest from physical labor (or should be in a rightly ordered world), so these long weekends present the opportunity to ease up, rest the body, clear the mind, maybe spend extra time with family and friends at one of those Memorial Day weekend barbecues. For years, I took the extra time as in invitation to either catch up on work that was pressing, when clients were otherwise occupied. Or maybe as a chance to tackle some problem that wouldn't respond to the normal time and energy of the work week. Fortunately, though, I've learned that filling up these occasional extended respites with work really yields minimum benefit and robs you of enjoying either time off or the company of loved ones - ideally both. And so it shall be this Memorial Day weekend.
Of course, a prayer of thanksgiving for those who gave their lives defending our country should be part and parcel of your thoughts and activities this weekend. Consider what you have now as the fruits of the ultimate sacrifice made by so many then. God bless them...and God bless America!
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