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Issue 25 of Ross Naylor's financial planning ezine. In this issue he tackles the issue of Dollar decline, currency diversification and Polish Zloty ETFs.

Published in: Economy & Finance
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  1. 1. Ross Naylor +48 (22) 389 65 70 (w) +48 512 275 706 (m) ul. Królewska 27 lok 411 Warszawa 00-060 PolandDissing the DollarI have read frequentlyof late about theinexorable decline ofthe US Dollar.However, I dontbelieve that thesereports tell the fullstory. At LastYes, the decline of the Dollar against the Chinese Yuan There is now a Polish Zlotywill be a long term trend. The same probably applies for exchange traded fund (etf)the Dollar against a range of currencies from other rising covering the Polish stockAsian countries, maybe even one or two in Latin market.America. I have bemoaned the lack of aYou could also say that the US Dollar has been in a long PLN version of this type ofterm downward trend against gold. fund in the past. Sure, there were USD versions but I didntHowever, my base currency is not the Chi nese Yuan, it is really see the point in those.the Pound and the Dollar is not in a long term downwardstrend against the Pound. Nor is this true for the Dollar Now we have a local currencyversus the Euro. version that tracks the performance of the WIG20 (theIn both cases, these currencies face powerful headwinds
  2. 2. of their own. 20 major and most liquid companies on the WarsawThis is an important distinction to make. I hear of Stock Exchange).investors forgoing investment opportuni ties becausethese opportunities are Dollar denominated and they too The key features of this etf arehave read about "the long term decline of the Dollar". as follows:In my view this is a red herring. If your base currency is * Provided by Lyxor Assetthe Pound or Euro then you should not pass up great Management (A fully ownedinvestments on the basis of something that is not actually subsidiary of Societerelevant to you. Generale). * Simple - Access to 20 leading Polish companiesMore Currency Thoughts through one securi ty. 12 months ago the * Launched - October 2010. rate for EUR vs the USD broke below * Liquid - Trades like a regular 1.2. At the time we share. were in the middle of a full blown * Low Cost - Total Expense Eurozone crisis and Ratio of 0.45%. all the talk was ofthe rate reaching parity.Then all of a sudden it turns on a dime (pardon the pun)and goes all the way up to 1.48. Today it is hoveringaround 1.4.This change in direction raises 2 thoughts.1. The issues that caused the crisis in the Eurozone 12months ago have not disappeared. They are worse. TheEuro will ultimately weaken as a result of this.If you are holding a large amount of E uros, it would beworth thinking of diversifying into other currencies inorder to take advantage of this.2. If you are a Euro investor, this presents a superopportunity to pick up USD denominated assets without Did You Know?having to worry so much about the currency risk. In the 250 years from 1800,It is still a fact that a lot of the worlds great funds are the world population will growUSD denominated. Often, we shy away from them at least 8 fold (maybe 11 fold).
  3. 3. because of the forex risk. Ask yourself what impact thisHowever, the highest the EUR has ever been against the increase is having/will have onUSD is 1.59 (March 2008). Therefore when buying USD your todays rate, there is much less to be concerned aboutthan if you were buying them at the rate of 12 monthsago.Sign Up If you have been forwarded this ezine by someone Find Me on else and wish to Facebook sign up to receive future issues If you use Facebook and want automatically, just to follow me on there, just enter your e-mail click the icon above and the address here. click it again on my profile page.And finally, Disclaimerthanks for taking the time out of your day to read mythoughts. I am well aware that time is precious and that The views expressed here are mythere are many c ompeting demands for it. own. They are not necessarily shared by AES International. TheyAs always, if you have any thoughts or feedback on any are subject to change at any timeof these articles or my ezine in general (be they positive based on market and otheror negative) feel free to drop me a line or leave a conditions.comment on my Facebook page. This is not an offer or solicitation for the purchase or sale of any securityRoss. and should not be construed as such. References to specific securities are for illustrative or informational purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities.
  4. 4. Call me: +48 (22) 389 65 70 (w) +48 512 275 706 (m)