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#1
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Euro vs Contrafund Update, or How to Buy a Glider Affordably
Last fall someone asked how to buy an affordable glider from Europe
with the Euro going thru the roof. My response was: "Invest your money sensibly and wait". I suggested a top ranked diversified mutual fund such as Fidelity's Contrafund. Here is an update on that strategy. Euro: $1.2944 (11/15/04) $1.3165 (3/20/05) $1.1914 (7/5/05) -7.957% FCNTX: $54.79 (11/15/04) $57.19 (3/20/05) $59.33 (7/5/05) 8.2862% Clearly the strategy is working (the differential is 16.2%). Mike responded with the concern that the Euro was predicted to rise back up to 1.35 in the next 6-12 months. I wonder what they are predicting today? My guess is the opposite, but who am I to say? The response to those predictions is if they REALLY knew they wouldn't and they would be mortgaging the house to buy currency futures. In reality the rising Fed Funds rate is making the dollar more attractive to foreigners. And the Fed rate is only going to go up in the future. Someone emailed me noting that you would have to pay taxes on your gain in FCNTX. OK, in the U.S. this will be mostly a capital gain if held for a year or more (15%). While we are not yet back to where the Euro hit its all time low, this strategy is within striking distance (13%). See you next quarter. Tom |
#2
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Tom:
Well, the Euro did peak pretty much as expected close to 1.35, but then dropped more quickly than earlier predictions called for as the dollar strengthened and the Eurozone weakened. The pundits (and I don't claim to be one!) predict a further softening of the Euro down to around 1.12 to 1.15 in the next few months. Then it's anyone's guess. Tom, even though I argued with you, I followed a similar investment strategy and hope to buy a new glider soon. I'm not sure that I would call $100k affordable to most folks, however. I rather like the comment of one old timer who said he didn't like to fly any glider costing more than a year's salary! I kind of feel the same way. Regards Mike |
#3
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My point about the Euro prediction is don't trust it, currency exchange
rates behave as a commodity and are very volatile. I do expect the Euro to drop further, simply because the Fed is raising rates (there is also a glut of savings - yes, savings - around the world looking for a place to park). My strategy doesn't attempt to predict exchange rates; it simply rewards patience. Affordable, of course, is a matter of perspective. I definitely would not call a $100k glider cheap! But $100k is A LOT more affordable than $135k. A year's salary is a reasonable safety valve for the risk of concentrating too much assets in a single investment (if you are working for a salary). Tom |
#4
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Does that mean when you retire, you _upgrade_ to a 1-26? ;-)
Mike the Strike wrote: I rather like the comment of one old timer who said he didn't like to fly any glider costing more than a year's salary! |
#5
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309 wrote:
Does that mean when you retire, you _upgrade_ to a 1-26? ;-) Worked for me! Jack |
#6
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Whatever floats your boat - the retrieves are shorter and the wings
lighter! |
#7
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My financial advisor told me to put everything I had into canned food
and shotguns......... |
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