Has the dead cat finished bouncing?

[Deleted User]

bigadaj said: People might want to avoid an element of currency risk and whilst hedging can be used, the pound has declined over many years against the dollar and many other currencies, which has increased returns in sterling terms.

But people tend to hedge against currency risk  the wrong way round: the bigger the home concentration, the more risk you are taking on. That is, if you want to preserve the value of your wealth in the world, rather than against your neighbour.

Prism

ZingPowZing said:

bigadaj said: People might want to avoid an element of currency risk and whilst hedging can be used, the pound has declined over many years against the dollar and many other currencies, which has increased returns in sterling terms.

But people tend to hedge against currency risk  the wrong way round: the bigger the home concentration, the more risk you are taking on. That is, if you want to preserve the value of your wealth in the world, rather than against your neighbour.

Personally currency risk in equities doesn't interest me. Plus or minus 30% is neither here nor there in the long run. I don't really care what my value of wealth is compared to the rest of the world. I'm not going invest in a particular market based on what its currency may or may not do.

[Deleted User]

Prism said:

ZingPowZing said:

bigadaj said: People might want to avoid an element of currency risk and whilst hedging can be used, the pound has declined over many years against the dollar and many other currencies, which has increased returns in sterling terms.

But people tend to hedge against currency risk  the wrong way round: the bigger the home concentration, the more risk you are taking on. That is, if you want to preserve the value of your wealth in the world, rather than against your neighbour.

Personally currency risk in equities doesn't interest me. Plus or minus 30% is neither here nor there in the long run. I don't really care what my value of wealth is compared to the rest of the world. I'm not going invest in a particular market based on what its currency may or may not do.

Are you sure about that?
For example, the exchange rate has been a significant  drag on VLS funds over the last 12 months. 
If that doesn't cause concern or questioning, fine, but people should at least be aware of a contributory factor.

bowlhead99

ZingPowZing said:

Prism said:

ZingPowZing said:

bigadaj said: People might want to avoid an element of currency risk and whilst hedging can be used, the pound has declined over many years against the dollar and many other currencies, which has increased returns in sterling terms.

But people tend to hedge against currency risk  the wrong way round: the bigger the home concentration, the more risk you are taking on. That is, if you want to preserve the value of your wealth in the world, rather than against your neighbour.

Personally currency risk in equities doesn't interest me. Plus or minus 30% is neither here nor there in the long run. I don't really care what my value of wealth is compared to the rest of the world. I'm not going invest in a particular market based on what its currency may or may not do.

Are you sure about that?
For example, the exchange rate has been a significant  drag on VLS funds over the last 12 months. 
If that doesn't cause concern or questioning, fine, but people should at least be aware of a contributory factor.

It seems like he's kind of agreeing with you, in that he is not worried about trying to incur extra cost to hedge or limit currency movements and preserve his pounds, or to maintain a massive home allocation, or avoid particular foreign countries based on how well he perceives their currencies might or might not do against the pound. 

This is because his goal is not specifically to preserve or grow the absolute amount of pounds he has in an effort to 'beat the world', because we don't really know whether pounds or some other currency will be better when it comes to sitting in the UK and needing to buy a Chinese car or German washing machine or American computer software service in retirement. So you are right that it's a risk to focus too much on the UK to get sterling returns; it may be riskier than just investing in a basket of foreign stocks and getting a basket of foreign returns instead. 

Prism

ZingPowZing said:

Prism said:

ZingPowZing said:

bigadaj said: People might want to avoid an element of currency risk and whilst hedging can be used, the pound has declined over many years against the dollar and many other currencies, which has increased returns in sterling terms.

But people tend to hedge against currency risk  the wrong way round: the bigger the home concentration, the more risk you are taking on. That is, if you want to preserve the value of your wealth in the world, rather than against your neighbour.

Personally currency risk in equities doesn't interest me. Plus or minus 30% is neither here nor there in the long run. I don't really care what my value of wealth is compared to the rest of the world. I'm not going invest in a particular market based on what its currency may or may not do.

Are you sure about that?
For example, the exchange rate has been a significant  drag on VLS funds over the last 12 months. 
If that doesn't cause concern or questioning, fine, but people should at least be aware of a contributory factor.

Its not something I can do much about which is why I don't think about it too much. I do keep track of currency movements out of interest but it doesn't influence my investment choices. I overweight UK companies because the global funds I have been using have had more allocated to the UK - not a particular decision on my part. There is one main exception with a UK microcap fund which is actually up slightly since last summer. I didn't select UK specifically but at the smaller company scale its hard to find decent funds from other regions.

It doesn't look like the exchange rate has been much of an influence over the last year. GBP is up 3.5% on the dollar, down 3% on the Euro and about even with the Yuan. Seems pretty par for the course. I would say that the drag on VLS is down to the particular exposure to the UK FSTE 100 that it holds. I have a big chunk in Fundsmith and the UK holdings look to be pretty flat for the last year but the dividends push this up a couple of percent.

Aberdeenangarse

Is the cat back?

quirkydeptless

...

Sailtheworld

It's so obvious. It's a resurrected dead cat bounce. The cat was dead, came back to life, lived a little longer and finally died - just what all the wise owls meant when they forecasted imminent crashes.

To be honest I'm not even sure if people who (with hindsight) identify dead cat bounces can tell the difference between a cat and zebra.

Apodemus

Aberdeenangarse said:

Is the cat back?

No, Schrodinger's still looking...

Bravepants

I know! The answer is obvious! We should have thought about it before! We need to put our money into gold!!! ...(Err...I'll shut up now!)