This started with me thinking about the risk the dollar is going to go down long term given that we are printing money at HUGE annual clips. Like 23% of all dollars in existence were printed last year. That is NUTS. And apparently no plan to slow down the printing.
So I want to buy currencies to try and profit from the dollar devaluation.
But I don't want to go too far out on a limb as who knows, I could be wrong. So I want to hedge myself. I want to short currencies that might be printing money even faster than we are printing money.
In my mind, while I know a TON of things can affect currency pricing, in the long run, if one company is printing money at a 23% annual clip, and experiencing 3% growth in inflation-adjusted GDP year over year, and another is printing money at a 3% annual clip, and experiencing 2.5% growth in inflation-adjusted GDP year over year, in the very long term the second one is going to have to appreciate versus the first one.
I always look at the U.S. dollar versus Mexican peso, only because its the one whose pricing I've been aware of at all over a long period. When I first went to Mexico in the early 90s, it was around 7 pesos to the dollar. And I remember someone telling me it had previously been like 4 pesos to the dollar. Then when I went back on vacation a few years later it was 10 pesos to the dollar. Then another vacation, 12, then another, 14, then another, 20. It was a prime example I think of one currency going up in value against another one long term, because I bet Mexico was printing money as a far higher annual clip than the U.S., almost year after year.
So what I want to do is try and figure out the currencies where the government is not printing money but that are expected to have a decent economy. I would focus on say 5 of those. Each [week] I would put in $X amount into one of those currencies, swapping out which currency every week. So I'd never buy a currency more than once every [5 weeks]. I would be dollar cost averaging in, nice and slow, to avoid getting hit with any freight trains.
Now, to hedge myself a bit in case the dollar did come on strong, I would put $X amount into currencies where it looks like the new printed money/expected growth ratio is much higher than the U.S. I would buy the dollars versus those currencies, say 5 of them, again buying a different one every [week] to dollar cost average in and avoid getting my head taken off by huge trends.
Then I would slowly increase my [weekly] buy ins. So it it was $100 one week, the next week it might be $101. Then the next week $102. Etc. etc. leveraging up my strategy slowly over time again to make more profits but minimize the risk of my head being taken off.
Thoughts? This is the culmination of all my thought powers after many years of deliberation. I hope it sounds like a decent plan!!!!
Thanks.
So I want to buy currencies to try and profit from the dollar devaluation.
But I don't want to go too far out on a limb as who knows, I could be wrong. So I want to hedge myself. I want to short currencies that might be printing money even faster than we are printing money.
In my mind, while I know a TON of things can affect currency pricing, in the long run, if one company is printing money at a 23% annual clip, and experiencing 3% growth in inflation-adjusted GDP year over year, and another is printing money at a 3% annual clip, and experiencing 2.5% growth in inflation-adjusted GDP year over year, in the very long term the second one is going to have to appreciate versus the first one.
I always look at the U.S. dollar versus Mexican peso, only because its the one whose pricing I've been aware of at all over a long period. When I first went to Mexico in the early 90s, it was around 7 pesos to the dollar. And I remember someone telling me it had previously been like 4 pesos to the dollar. Then when I went back on vacation a few years later it was 10 pesos to the dollar. Then another vacation, 12, then another, 14, then another, 20. It was a prime example I think of one currency going up in value against another one long term, because I bet Mexico was printing money as a far higher annual clip than the U.S., almost year after year.
So what I want to do is try and figure out the currencies where the government is not printing money but that are expected to have a decent economy. I would focus on say 5 of those. Each [week] I would put in $X amount into one of those currencies, swapping out which currency every week. So I'd never buy a currency more than once every [5 weeks]. I would be dollar cost averaging in, nice and slow, to avoid getting hit with any freight trains.
Now, to hedge myself a bit in case the dollar did come on strong, I would put $X amount into currencies where it looks like the new printed money/expected growth ratio is much higher than the U.S. I would buy the dollars versus those currencies, say 5 of them, again buying a different one every [week] to dollar cost average in and avoid getting my head taken off by huge trends.
Then I would slowly increase my [weekly] buy ins. So it it was $100 one week, the next week it might be $101. Then the next week $102. Etc. etc. leveraging up my strategy slowly over time again to make more profits but minimize the risk of my head being taken off.
Thoughts? This is the culmination of all my thought powers after many years of deliberation. I hope it sounds like a decent plan!!!!
Thanks.