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CURRENT MARKET TREND: Up 5/27/16 @ 2090
Stop-loss 2026

Friday, April 22, 2011

Turn Your Stock Market Gains Into A More Valuable Dollar

Alberta Rocks recently had a great post on the value of stock market gains, which he concluded an 19.4% gain on the TOTAL gain of your holdings. Now it's my turn to teach you how keep more than 19.4% of those gains, and even amplify the gains by 10-25%. Basically what we'll be doing is a carry trade, but there's no need to worry about interest rates.

What I've been doing since September of 2010 is turning my market gains into Australian Dollars. You don't need a Forex account to do this since the inception of ETf's and Trusts. A quick search turned up ticker symbol FXA which is a Rydex Currency Shares AUD. Another CiLian, Herz, recommended the Canadian Dollar, but I don't believe CAD has as much upside potential as AUD.

Since September of 2010 the AUD/USD has risen 18%. The US Dollar index has dropped 7%. This would give you a total gain of 25% on top of the market gains you locked in! Why hold dollars when you can hold foreign currency for the cost of one transaction through your brokerage? In the near term I believe the AUD is due for a correction. Anything down near the parity level would be a great entry, but I believe 1.02 or thereabouts will limit the downside. If you want to lock in your market gains in real rather than relative terms, why not test out this "carry trade".

Here is my current daily chart of the Australian Dollar:

It looks like the 110 area should cap the short term advance, but after that it's off to even more all-time highs. I also believe capital is flowing into Australia at high rates. This capital flow IS a global phenomenon. Somehow money finds the best investment and rides it into a bubble. The trick is knowing when to get out before the bubble bursts. I think the Australian Dollar has a chance to hit 1.76-2.00 before that bubble bursts, and plan on putting my USD into AUD the whole way. Until next time,



1 comment:

  1. good stuff Geno - here are the Gann swing charts http://chartramblings.blogspot.com/2011/04/aud_23.html