not2old

If I may bring this back to the first point the OP was looking at with respect to currency & away from specific commodity, index or equity trading dialogue to my question to you Michael with regard to taking $100,000US buying any currency & you said 'likely Euros'

Has that position changed & might buying Rubles in hard currency and is the Ruble likely to go from its 55/dollar range back to 30 to the dollar range within the next 12 months - if so, then that would be the one to go with?

sources:

Business insider (Goldman Sachs) jan 12 2015
http://www.businessinsider.com/goldm...outlook-2015-1


Goldman Sachs has sharply cut its 2015 outlook for the ruble after revising its oil forecasts.

Goldman now expects the ruble to fall to 70.0 rubles per dollar over the next three months, down from its previous forecast for 46.2 rubles per dollar.

In twelve months, Goldman expects the ruble be at 60 against the dollar, down from its previous outlook for 49.6.


FX street Edinburgh Feb 2104
http://www.fxstreet.com/news/forex-n...b-9f3106833f21

FXStreet (Edinburgh) - Swings in crude oil prices and geopolitical unease in Ukraine will remain the key drivers for the Russian ruble, suggested Vladimir Miklashevsky, Economist at Danske Bank.

Key Quotes

“We remain bearish on the outlook for the RUB but we now expect a slightly smaller depreciation than in previous forecasts due to the slight rebound in the oil price”.

“Indeed, it is all about the oil price and geopolitics at the moment as attempts to solve the Ukraine crisis are ongoing”.

“Volatility will depend on swings in oil and news from eastern Ukraine”.

“We do not see any support from fundamentals in 2015. We lower our 1M, 3M and 6M USD/RUB forecasts to 71, 77 and 85 from 75, 85 and 90, previously”.


Trading evonomics 20 June 2015
Russian Ruble Forecast

Russian Ruble Forecast
The Russian Ruble is expected to increase to 54.96 in June of 2015 from 53.51 in June of 2015. In 2016, the Russian Ruble is expected to increase to 57.06 . In the long-term, the Russian Ruble is projected to trend around 54.15, 47.99 and 35.69 in the years of 2020, 2030 and 2050 respectively.

Russian Ruble Forecasts are projected using an autoregressive integrated moving average (ARIMA) model calibrated using our analysts expectations. We model the past behaviour of Russian Ruble using vast amounts of historical data and we adjust the coefficients of the econometric model by taking into account our analysts assessments and future expectations. The forecast for - Russian Ruble - was last predicted on Sunday, June 21, 2015.

My comment

The folks in the last quote above predict by Q4/15 the RB/$ will be 45.75

So, from a current 55 to 45.75 could this be a sure fire winner currency FX investment, or was it a missed opportunity back in January 2015?

.

Michael

Nope. I don't invest in emerging markets including their currencies. I'm not a timing trader and to invest in emerging market, you have to think day by day. Emerging markets can have quick booms and busts and can have overvalued markets one week and undervalued markets the next week.

China is a good example. Prior to the 2008 crash the Shanghai composite index was trading near 6,000 and was very over priced but four months later it was at 1,400. It recovered quickly to about 3,000 but then over the next 4 years it drifted downward to around 2,000. And then over the last year, it shot up to 4,500. It is now considered to be very overpriced again but investors like to ride trends but the trend for emerging markets can turn on a dime. Also lack of transparency is a trademark of emerging markets. You are never sure what you are buying. Although China claims to be growing at 7% or more, no one is 100% sure what the actual figure is. Emerging market corporations also lack transparency.

Brazil is another market that looked very good in 2011 but since then it is down about 30%. Petrobras (the Brazilian oil company) was the company that was going to drive the Brazilian economy but missing money, corruption, phony balance sheets, and more has created a 5 years slide in the stock.

The Russian market looks very undervalued but the country is loaded with corruption and nobody knows what Putin's next trick will be. Russia is also very dependent on crude oil and can't shut off the spigot since the wells will freeze to try to reduce supply to force the price upward.

The Indian markets (NIFTY) has done reasonably well over the past 5 years rising about 55% but inflation is very high and the Rupee has dropped about 40% so that's only a real return of about 15% in USD.

You see phony balance sheets and corrpution in all markets but in emerging markets, that appears to be common and not the exception.

Michael

That is pure speculation. It could just as easily drop another 20% or more.

A FX trade is highly leveraged (I believe 100:1 for developed country's currencies and 25:1 for emerging market currencies but some brokers cut the leverage in half), in one day you can lose your entire investment if an emerging market currency moves 4% in the wrong direction and if it moves more than that, you better have deep pockets. Even if it doesn't move 4% but instead 1%, you have to cover that loss the next day to keep the contract open. FX trades are not really trading currencies but are contracts between to parties to see who is smarter. It's a zero sum game where the loser for the day pays the winner of the day. Since it is not an actual currency trade, neither party is paying for the leverage (the margin) but the brokerage will cover the loss if a party can't come up with the money to cover the loss that exceeds what was invested.

A legitimate FX trade is often used by companies to hedge currencies. For instance, an Indian company may be purchasing a Boeing aircraft but wants to make sure that it pays a certain amount of rupees for the plane when it is delivered in one year. The company then sells rupees and buys dollars and if the rupee rises, the company pays the loss in rupees and if the dollar rises, the company gets paid the equivalent dollars in rupees. No mater which way the currency moves, the company pays the same amount in rupees but it may not all be to Boeing. Doing that is not free since the trading commissions will probably cost the company a small percentage.

not2old

well of course, even back in January the analysts got it wrong, as they have done on the Euro, other currencies and market predictors.

Apart from the tail end of a few retractable Canadian bank preferreds that are paying a decent dividend, everything else we have >90% is in real property & cash - which for us as retirees suits us & hopefully we get to spend the lot before we pop off, because we started with zero & hopefully end the same way

not2old

Forgive me if I wasn't clear on the FX investing

I wasn't suggesting FX trading (pips), more just buying the hard currency for the mid to long haul which was my question to you on the $100k US & popped up the question about the Ruble.

I think that its been covered in the discussions above & sorted

I need to go open my box of money under the bed to see if its still there & make sure the interest on any liquidable money in our bank accounts is covering the inflation rate

Michael

Analysts, fund managers, and financial planners almost always get it wrong and when they occasionally get it right, they are hailed as a genius. John Paulson was god's gift to hedge fund investors since he predicted the market crash of 2008 and his hedge fund shorted a large number of securities. However since then, he started a new gold hedge fund when gold was at it's peak and purchased a lot of gold. When gold dropped to $1,600, he purchased more. As it moved toward $1,200, he kept buying. All his other hedge funds have barely made money in a market that grew over 100%. He's no longer considered a genius.

Michael

Are you going to put the currency in a sock? Are you going to deposit it in a Russian bank? If you deposit it in a Russian bank, will the interest paid cover inflation? Are you going to buy Russian government bonds? Are you going to purchase securities and know what you are buying? That is why there should to be a multipart plan. Buying a currency when you really don't know which direction it will be going is a very risky investment since you are betting everything on the currency movement alone and paying exchange rates.

If I bought the Euro, I'd probably invest the money in Eurozone securities since if the Euro falls, the market will likely rise. Developed markets currently tend to work that way (that's not the way they work normally but market are not normal currently).

not2old

My point on currency (FX) was buy the cash, not an index, nor deposit into a foreign bank or foreign government bond

What I was asking you in my original question (maybe I wasn't clear), was 'if you took $100k US of your own money today, what currency would you buy', you responded euro.

Maybe I was over simplifying my question?

Which is what the OP was looking at 'to keep or convert her money to pounds or keep it euros'

not2old

for the fun of it, from now till December 31 2015, stick your neck out & be prepared for a loss.

Take $10,000 cash to buy hard currency, either Euros, or Rubles

Which one will give you the best net return?

Michael

If we are talking about Euros and pounds, that is a little different since they are both developed markets. But it is still the same issue. If he just wants to keep it in cash, that is a guaranteed loser. Even depositing it in a near 0% bank account, that is also a guaranteed loser. That's money that is losing value since it isn't even keeping up with inflation.

For instance if I put my money in a 1% savings account and inflation is running at 2%, I've lost 10% over 10 years. However if I invest in large bank preferred shares that pays 6.5% and even if interest rates rise (worst case scenario), I will have made 65% over 10 years and even if my preferred shares market value drops 40% because of the interest rate rise, I'm still further ahead then if I put the money in a 1% savings account.

As far as which currency is a better investment, no one knows.

Michael

Absolutely no idea.

Michael

I think you are trying to look for a simple answer but investing is complex. Many forces are pushing and pulling at an economy (central banks, interest rates, currency values, speculators, geopolitical events, hedge, mutual, and pension funds, banking, employment, GDP growth, wealth perception, etc.).

Therefore there isn't a simple answer as to which currency will be a good currency to hold. It's a crap shoot.

not2old

crap shoot & crystal ball gazing, market predictors.......we could discuss this till the cows come home

I've done my share of all of that, everything from simple savings accounts, term deposits, notes, bonds, PINES, money market certificates, Debentures, straight penny to blue chip stocks, commodities, dividend stocks, split shares, 2x & 3x ETf indexs, even the VIX, all common or popular ETF's, closed end funds - open end funds, straight option trading, buying blue chip stocks that pay good dividends & hedging by selling the long call option in the money......

These days, its primarily cash - real cash, little to zero risk, liquid all the time, also blue chip bank stocks retractable preferred shares and as long as our money keeps up with inflation I figure we're doing OK

In the past 50 years I/we have never invested in mutual funds ever, although 'what is' an index or an ETF?

On the long haul, it was real estate & mortgages that provide us the best return (ROCE) as well as ongoing continuous income streams

Michael, good luck with your investments

I'll bring this thread back to the top at the end of this year to see what happened to the $10,000 to euro or Ruble investment

.

Michael

An index fund or ETF is an electronically traded fund (like a stock) that follows an index. Common index funds track the S&P500 which tracks the S&P500 broad market with stocks held at the same ratios that are defined in the index. Since ETFs are traded, tracking errors can occur but if the tracking error gets too large (maybe 0.25% or larger), there are high frequency trading platforms that are constantly monitoring prices on the exchanges and when the tracking error gets too large, the trading platform will buy or sell correcting that tracking error and the person that owns the trading platform makes money since it is arbitraging and will immediately do the opposite (sell or buy) making money on the difference. The trading platform doesn't already need to own the ETF to sell the ETF since it will cover the ETF trade by immediately buying it. Therefore the trading platforms are calculating what the ETF price should be based on the price of the stocks in the ETF, their ratios, and fair value (fair value is based on dividend distributions and an index doesn't account for dividends) at lightening speeds to try to find a profitable arbitrage.

If a company that provides ETFs wants to track something and there isn't an index available to track that, they can create their own index including ratios and then buy the securities to create creation units (100,000 ETF share may possibly be in a creation unit) and sell those creation units to market makers. The ETF company will create more creation units if there is demand for that ETF or destroy creation units if market makers wants to get rid of creation units. Since markets move very fast, creation units are created or destroyed very quickly once an order is placed by market makers. Many times pension or hedge funds want a large number of shares of an ETF but if they buy them on the market, demand becomes too high forcing the price up causing tracking errors but by placing an order for a creation unit through a market maker, it doesn't cause the tracking error and the pension or hedge fund gets a better price. The same is true when they want to sell the ETF and then the market maker places an order to destroy a creation unit.

The individual investor eventually gets to trade the ETF when a pension or hedge fund wants to sell less than a creation unit and they make the trade on the open market. That generally happens very quickly.

All the fund manager does is create or destroy creation units and distribute dividends. Occasionally a tracking index can be rebalanced but when that occurs, a monkey just follows what has to be done to rebalance the fund so it accurately tracks the index.

Since the process is very simple, the price is set by the market, and individuals don't redeem the shares but trade the shares, the cost is low so expense ratios are low and there isn't any hidden expenses. When creation units are created or destroyed, the pension or hedge fund do pay a small percentage so that fund manager can profit but that is less than if the pension or hedge fund purchased or sold such a large quantity on the open market.

not2old

Michael, there was a period when I first emigrated here, when I had a few dollars I was buying small discounted second mortgages & quite a money maker it was. Did that for 10 years & helped us get into the real estate market

Have you ever looked into that as part of your portfolio of investments?

Or, buy to let properties?