On Sep 24, 4:57 am, "Laura Lin" <l...[at]volvo.xh> wrote:
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People who think markets are one-way bets are precisely those who
should not speculate. At its current levels the dollar buys more in
the U.S. than its foreign equivalents do in many other developed
countries. There have been articles in the press about Canadians and
Europeans (especially Brits) coming to the U.S. for bargains, while
American tourists suffer sticker shock in Europe. Hundreds of academic
papers have studied whether "purchasing power parity" (PPP) applies in
the currency markets, and I have read dozens of them. My reading of
the literature is that PPP does apply at long time horizons,
especially when deviations become extreme. At present they have become
large. Thus I forecast that the excess (over U.S. money market funds)
total return of currrencies such as the Euro, Pound, and Canadian
dollar will be negative over an intermediate horizon such as the next
5 years. I well understand that my forecast could be wrong.

On Sep 22, 12:35 pm, joetaxpayer <joetaxpa...[at]nospam.com> wrote:
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I suggested this in a message here in 2002 -- you can Google
"beliavsky viceira currency" to read the discussion. Here is the
abstract of the paper I mentioned.

Foreign currency for long-term investors
Authors: Campbell J.Y.; Viceira L.M.; White J.S.
Source: The Economic Journal, Volume 113, Number 486, March 2003 , pp.
C1-C25(1)
Publisher: Blackwell Publishing
Abstract:
Conventional wisdom holds that conservative investors should avoid
exposure to foreign currency risk. Even if they hold foreign equities,
they should hedge the currency exposure of these positions and hold
only domestic Treasury bills. This paper argues that the conventional
wisdom may be wrong for long-term investors. Domestic bills are risky
for long-term investors, because real interest rates vary over time
and bills must be rolled over at uncertain future interest rates. This
risk can be hedged by holding foreign currency if the domestic
currency tends to depreciate when the domestic real interest rate
falls. Empirically this effect is important.

- quote -

I was writing my posts as though this was the equivelent of a money
market fund composed of foreign currencies, a diversified basket. If, in
fact that's what it is (the prospectus doesn't spell out the holdings,
rather stating,"Falling U.S. Dollar ProFund takes positions in financial
instruments that, in combination, should have similar daily return
characteristics as inverse of the US Dollar Index®. Falling U.S. Dollar
ProFund’s assets will have significant exposure to foreign (non-U.S.)
“hard currencies.”) then I'd think it could be part of diversifying same
as overseas stocks. It seems the low return excludes dividends, but the
fund is so new, it's tough to say. Either way, one can be very well
diversified and never need such a product. The foreign currency exposure
within the overseas funds is enough.
To close, if the fund is purely structured to be 100% inverse to the
dollar, I agree it should be avoided.
JOE

"Douglas Johnson" <post[at]classtech.com> wrote in message
news:a91gf39hlu0180ot5g9ufhsh7sv3mrpcj3[at]4ax.com...

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You sound like Mark Hulbert.

(As I like his stuff, you can take that as a compliment)

"Laura Lin" <llin[at]volvo.xh> wrote:

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While I'm not bullish on the dollar, anytime lots of people say "nowhere to go
but down", I start thinking the trend has about run it's course. -- Doug

joetaxpayer wrote:

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I didn't see you ask this question, but I have never seen nor
recommended an asset allocation with a bear market fund, but then I
don't generally look at, or recommend, asset allocations (at least not
at this level of granularity).

- quote -

Usually, depending on implementation. If this is a bear market fund
that shorts the market, yes. If it is a market neutral fund, maybe not.
If it is a fund that invests in companies that theoretically will
perform better in a bear market than the broad market, no.

- quote -

Absolutely, but I think purchasing a falling dollar fund is also an
attempt at market timing, unless you think the dollar will continue its
decline against other currencies indefinitely. Even if you do believe
this, looking at a chart of FDPIX, it appears to have a very low long
term return (something like 1.6%) with considerable volatility. How
does that fit into your asset allocation?

Having sort of gotten lost in the weeds here, I'll go back to my
original point: If we (this group) believe that the OP is investing in a
losing investment, we should tell him so. If we believe the investment
is worthwhile, then a Roth is a perfectly valid place to have it,
depending on the rest of the OP's portfolio, which we know little about.

-Will

Will Trice wrote:

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Both. Wait, neither. Here goes: There may be times that one's asset
allocation is in need of adjustment, but the proper moves may not be
appropriate due to other issues, timing on taking gains for LT/ST, etc.
I could see using an inverse index fund (proshare?) to accomplish the
balancing. So, no, if you are asking if this product is never
appropriate, I'd have to say it depends on the circumstance. Much of the
same reasoning applies to the Roth, although I tend toward suggesting
(as I alluded to Cramer) that one's retirement portfolio should lean
toward conservative (as in properly allocated, but aggressive enough for
one's risk tolerance).

I repeat my question - when was the last time you saw (or recommended)
an asset allocation that included such a fund? Would you not agree that,
long term, such a fund has to offer a negative return? Lastly, if not a
long term strategy, doesn't the purchase of this fund imply market
timing, which we generally discourage as a group here.
JOE
www.joetaxpayer.com

joetaxpayer wrote:

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So what you're really saying is that you believe that any strategy using
a bear merket fund is doomed to failure (i.e. will lose money) and thus
should not be implemented via a Roth IRA? Or are you just saying that
Roth funds should be invested conservatively? If the former, then your
recommendation might better be, "don't invest in a bear market fund."
If the latter, I don't think I agree unless the OP's overall investment
strategy needs to be conservative (or needs some proportion of
conservative investments).

-Will

Laura Lin wrote:
- quote -

Laura - while trimming is promoted, you snipped enough for it to look
like I stated FDPIX was speculating.
I was specifically referring to the bear market fund (don't know which
OP had in mind, he didn't offer a ticker), NOT FDPIX.

I did say "If you truly believe (I can't comment) the dollar will fall,
your best bet is to buy a good overseas fund. You'll get the return of
the market, and benefit from the dollar fall."

I wouldn't be too critical of FDPIX as part of a properly allocated
portfolio. Looking at the prospectus, it takes position in foreign
currencies to create movement inverse to the value of the dollar. It
does this in a way that provides a yield i.e. interest, along the way.
JOE

joetaxpayer wrote:
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I'd say it's a safe investment to park money in the falling dollar as USD has nowhere
to go but down. Even the former allies have abandoned USD and more to come soon.

What's speculative is to assume USD has some special value in the eyes of the rest of
the world - those days are gone.

Will Trice wrote:

- quote -

FDPIX is the falling dollar fund. I did say not to put it in the bear
market fund, quoted above, because at least in a post tax account, you
can sell and take the loss. In a Roth, you've just permanently damaged
what should be long term savings. Even 'Madman' Jim Cramer talks about
investing your retirement account conservatively, and leaving the
speculating for one's, er, 'mad money'.
JOE

joetaxpayer wrote:

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While I agree with you about the OP's investment choices, if he does
decide to go with something like FDPIX (or whatever), why not put it in
a Roth?

-Will

VBS (Vanguard Brokerage Services) annual cost is $30, unless you are a
Voyager or higher customer ($100K invested in _Vanguard Funds_)
https://personal.vanguard.com/VGApp/...eesContent.jsp

ProFunds appears to charge a $15 annual maintenance fee for IRAs, so I
wouldn't consider that a cost-effective route either.

As JoeTaxpayer may have implied, other brokers can provide you no fee IRAs
with no brokerage account fees and the funds you are interested in NTF.

Mark Freeland
BnetOnewsX[at]sbcglobal.net

"Joe" <oot[at]jp.jp> wrote in message news:5lj3orF8i7c2U1[at]mid.individual.net...
- quote -

Andrew Koenig wrote:

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I misread regarding cost. This is offered NTF (no transaction fee) thru
Vanguard. But 1.5%? Ouch.
My other remarks regarding the use of such a fund still apply, although
as happens with most new posters, we know nothing about him. I have yet
to see anyone suggest a falling dollar fund as appropriate for any
particular asset allocation.
JOE

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:572dnShlWrYwu2jbnZ2dnUVZ_jKdnZ2d[at]comcast.com...

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I don't understand this remark.

If you already have a Vanguard brokerage account, and you want to invest in
FDPIX, I don't see much of a downside in doing so through Vanguard. The
only cost is that you must hold your shares for six months or more;
otherwise Vanguard will charge you 1% when you sell (with a minimum of $50
and maximum of $250).

The 1.50% mentioned earlier is the fund's expense ratio, which is presumably
the same no matter how you buy the fund.

So, assuming that:

You have decided that you want to buy FDPIX, and
You already have a Vanguard brokerage account, and
You intend to keep your shares of FDPIX for at least six months,

then I don't see any reason not to buy it through Vanguard.

Joe wrote:

- quote -

I would suggest doing everything different than you plan.
If you are with Vanguard, you should use them for what they excel, their
low cost index funds.

If you really want a fund they don't offer as no-fee no-load, consider a
low cost broker, who will offers as a regular no-fee purchase.

If you truly believe (I can't comment) the dollar will fall, your best
bet is to buy a good overseas fund. You'll get the return of the market,
and benefit from the dollar fall.

A Roth IRA is no place for a bear market fund which would be part of a
market timing approach, which few, if any, here, would recommend.
If you are just getting started, and this small Roth is all you have, an
S&P index or total market fund is a purchase that 10 years from now will
beat what most investors see for a return. (if the market rises 8%/yr,
most investors will see about 3-4, due to bad timing. I can post a
reference to the study that makes this conclusion)

JoeTaxpayer

just discovered that vanguard offers an "other fund families" category and
I'd like to invest in some of the inverse funds, such as bear market and
falling dollar, ie. Profunds FDPIX

apart from the 1.50% cost, most are no-load

for a small roth IRA account, is there something else to be aware of doing
it this way? would it be better to actually open a roth IRA with the fund
owner (ie. Profunds) rather that "doing it via vanguard"?