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Swiss Decision to Moderate Currency

edited August 2011 in Fund Discussions
Won't the decision by Swiss govt to moderate (?right word) their currency mean that swiss francs prices will go down (or at least stop their gain) in investments like FXF? I think this is 1/4 of PRPFX so since at some point gold has to start coming down and that is another 1/4 of this fund, how much difference do you believe it will make in future returns?


  • edited August 2011
    I'm sure others will not agree, but I think the currency issue is an instance of "best house in bad neighborhood", but the "best house" changes. The Swiss Franc is the best house, but at some point, too many people try to get into the house, and the authorities have to intervene. Then everyone tries to figure out which house to go to next. The world can't simply pile into the Swiss Franc. The end result is an increasingly exhausting game of musical chairs where the world tries to go from currency-to-currency and hope they're in the "right one" when the music stops. It is not a bad idea to be diversified in terms of currencies (in terms of investments denominated in different currencies), but trying to "pick the right one" for this week/month/year is futile.

    There are an increasing amount of people who look at what is going on and do not want to play that game - understandably - and would rather just skip to what they believe to be the end result, and are gathering all manner of "real assets" (gold, commodities, etc - as I discussed in another thread, one can really "think outside the box" and a lot of different things can fall into this category.) Rather than get caught up into trying to pick "which piece of paper is the best piece of paper this week/month/year", look for hard assets. I continue to hold commodity funds and add to MLPs.
  • Thanks for your input, Scott. I started to try and learn more about currencies, but that market seems much more suited to day traders (which I definitely am not) so I didn't want to try and stuff more data into my brain if I wasn't going to get involved with it.

    MLPs sound very interesting - I did a quick Google search to get quick info on. Would you mind giving me one or two examples of the ones you bought? Can you buy through a broker or do you have to buy directly?
  • Hi Kathy. I don't have any insight to share on Swiss currency or the direction of precious metals going forward, or even what treasuries will be doing (another sizable holding in this fund). I do think though that all these investments are "safe havens" that should do well or at least hold up in turbulent economic and political times. I'm thinking turbulence will be with us for the foreseeable future - at least through 2012.

    So, for that reason, I've been adding to PRPFX. I started the year at about 10% PRPFX and I've pushed it to ~15% now. I see it as "the" core to my portfolio. PRPFX should (hopefully) hold up well in a down swing and still make pretty decent returns in good times.

    Just my 2 cents... and on a side note, I hold HSTRX at a much smaller percentage for pretty much the same reason - safe/conservative during bad times.

  • edited August 2011
    Edited to add: see this thread for the discussion of SMF and its multiple hedging options. That fund is having a presentation/conference call today.

    I have diversification in terms of emerging market local bonds, US/foreign investments, some London funds denominated in GBP, etc, but I really have no interest in taking bets on specific currencies or trying to get into a currency fund. It's just a musical chairs game that I really don't want to play (or better yet don't want to actively play/devote time to) - the Swiss Franc is fine, but again, the world can't pile into it. Diversification in currencies for the long-run, fine, but I would not try to make active bets on currencies. I just have no interest in buying currency ETFs or anything like that.

    MLPs (Master Limited Partnerships) These investments do generate a K-1 form for tax time. These publicly traded partnerships are generally natural resource related and often dealing with the logistics and distribution of energy (pipelines, ports, etc.), although there are a number of others that have appeared, including two fertilizer MLPs. MLPs are not subject to corporate income tax, instead they pass through income through to the holders ("limited partners") of their shares, often referred to as units.

    While not a perfect comparison, sort of like "Natural Resource REITs" - natural resource-related companies that provide/pass through a high level of distributions to shareholders (or in this case unitholders/limited partners.) Many MLPs yield in the 5-8% neighborhood, and some currently yield more. If the business takes a downturn, however, so can the yields. These stocks can be volatile, although I believe they will hold up reasonably well in an environment where people are going to be seeking yield and I believe these are good inflation protection.

    I own Brookfield Infrastructure (BIP), CVR Partners (UAN) and Salient MLP Energy and Infrastucture (SMF). The Salient fund is a newer, closed-end fund that can hedge. I particularly like Brookfield (although I'd wait for a pullback) and I'm considering adding more to the Salient fund. I think Brookfield is a really interesting collection of global assets (everything from Timber in Canada to power transmission to timber to ports, etc.) and does have a solid parent company in Brookfield Asset Management. The Salient fund is new, but a particularly compelling looking take on the sector with its ability to hedge.

    Again, there are tax consequences with these and may be subject to volatility both in terms of price and distribution.
  • edited August 2011
    I think it's good to learn more about the currency market - I know I'm always learning more each day or trying to. However, I really would not recommend trying to actively try to trade currencies, whether via ETFs or any other means. Do continue to garden, which I think is really important.

    MLPs are publicly traded and can be bought via any broker.
  • Reply to @scott: Thanks, Scott. I admire you for your continual learning process. But I'm a little too overwhelmed by all this lately to try and take on more right now. I've actually been happy with my Portfolios throughout this 2-week mess, so have not panicked..... yet. My biggest concern is a complete collapse of the market like that guy said (will go down to 400). I've been catching up on my political history and watched terrific dvd on Woodrow Wilson and the conditions when he took office. I was totally surprised - and absolutely horrified - to find sooo many awful conditions then that seem almost exactly the same now (rich get richer, completely took over government and leave the poor starving in the streets). Situation too close to not believe that it will get worse.
  • Reply to @MikeM: Thanks, Mike, always nice to hear from you. I am definitely keeping my shares in PRPFX at 5% of total Portfolios. I found that was the best percentage for me to not worry about any ups and downs in that fund. I did, however, give up on HSTRX quite a while ago - mainly because it seemed to consistently lose more in poor markets that my other "safer" funds which bothered me too much to keep. But that fund has done very well for its type over an extended period - and I know many members here like it a lot.
  • Reply to @scott: Thanks, Scott, for your added information. You are sooo way over my head in your knowledge of these type of investments that it sounds like a whole new learning process for me to even digest the basics of some of these type. But I've made a printout for me to check into your links to find out a little more.
  • Reply to @scott: Very interesting article, Scott, thanks for the link. I don't understand much of it, but enough to watch this currency's movements over the next few months.
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