The Dollar

[ayla]

Wanted to start a thread JUST on the dollar. I am trying to understand and have a lot to learn. Yesterday, I did a lot of backtesting and couldn't see where there was that much correlation between the rising I Fund and the lowering value of the dollar. There was some but seems recently, that correlation is even less than before. Wanted to know what others think.

And I read this interesting tidbit at:
http://www.nakedcapitalism.com/2007/10/vietnam-and-qatar-retreat-from-dollar.html

"In a further blow to the dollar's standing, Vietnam and Qatar both announced that they are cutting their holdings of dollar assets. Note that this isn't merely "diversifying away from the dollar" which could be accomplished by effectively reducing ongoing dollar purchases (both run trade surpluses which oblige them to buy dollars) via exchanging them, say, with euros. As FT Alphaville reports, they are taking the far more aggressive move of selling existing dollar holdings:"

 

[Birchtree]

"In the short-run, I believe the U.S. Dollar should bounce sometime over the next couple of weeks, as the U.S. Dollar Index is now trading at 5.68% below its 200 DMA - an oversold level that we have not seen since May 2006."

http://www.safehaven.com/article-8544.htm

 

[Birchtree]

"This is not your father's bull market. Daddy's bull was driven by a strong domestic economy. This bull market appears now to be driven by three factors, two of which are related to the falling dollar."

http://www.financialsense.com/editorials/navarro/2007/1006.html

 

[Guest2]

Wanted to start a thread JUST on the dollar. I am trying to understand and have a lot to learn. Yesterday, I did a lot of backtesting and couldn't see where there was that much correlation between the rising I Fund and the lowering value of the dollar. There was some but seems recently, that correlation is even less than before. Wanted to know what others think.

And I read this interesting tidbit at:
http://www.nakedcapitalism.com/2007/10/vietnam-and-qatar-retreat-from-dollar.html

"In a further blow to the dollar's standing, Vietnam and Qatar both announced that they are cutting their holdings of dollar assets. Note that this isn't merely "diversifying away from the dollar" which could be accomplished by effectively reducing ongoing dollar purchases (both run trade surpluses which oblige them to buy dollars) via exchanging them, say, with euros. As FT Alphaville reports, they are taking the far more aggressive move of selling existing dollar holdings:"

Ayla,
I've been tracking the TSP Funds, EFT's & Indexes which reflect a close
estimate of how well the TSP is fairing during Market Hours. The key word
here is "reflect". The differences between the the SPX - C Fund are small.
On the other hand, the EFA - I Fund differences can be substantial. With
this information at hand, Management Fee's and the Dollar account for the
swings. But if the TSP and Indexes are to closely reflect one another, the
swings must eventually correct themselves to maintane consistancy.
Let me give you an example:
----------------------------------------------------------------------
On October 4th, 2007 the TSP close of business results accumulated in
a YTD +.47% (or .12 cents) which the I - Fund has payed better then the
EFA. When the difference between the I-Fund / EFA goes into double
digits (ie... .10, .11, .23 etc) the I - Fund "MUST" pay out less then the
EFA in order to maintane it's consistancy with the EFA. (Have I Lost You)?
On October 5th, 2007 the EFA rose 1.02%, however, the I - Fund only
rose .71% for a difference of -.31%. This corrects the differences to
.16% or .04 cents which is within the single digit difference it aspires for.
I've even seen the TSP under payed vs. the EFA. This means a better
return from the I - Fund or at minimal a lesser lose then the EFA.
-----------------------------------------------------------------------
In conclusion, knowing the tracking differences of each TSP Fund has
given me (I believe) a little more insight on using the Dollar/Mgt. Fee's
differences of the S & I Funds. Knowing the dollar is going down or up
is important on the trend side. But I won't know what will happen for
tomarrow. However, if I know the I Fund owes the EFA .26 cents, It will
have a strong impact on my IFT the day before.
(Sorry for being so lengthy, I'm really excited about this tidbit)

 

[ayla]

Thanks very much, squalebear. That helps a lot. It gives me a new path to investigate when I know I want to be IN the market but not sure whether to go with the I fund or S. I knew there was a correlation between EFA and I fund but didn't think about that correlation actually being an "indicator" of sorts.

I wonder if the delay we must endure when doing an IFT will handicap too much the use of this as an indicator. Hope not.

Thanks again.

 

[Guest2]

Your most welcome. I hope it helps us all. If I knew how to do attachments, I'd send you what I have. Maybe a little more time will help me become more familiar. In the mean time. I'm happy to discuss this at any time.

 

[Guest2]

The IFT delay will certainly effect this. I stay out of the I Fund and
expect a greater lose for that day, then go figure, the I Fund adds to
the debt (increase of the double digits) instead of adjusting downward.
After 2 years of tracking, it simply adds to the decision making process.
This will not predict the outcome of the current days end results. And
thanks for your interest and reply.

 

[Bullitt]

Anybody lying in bed awake because of the weakness in the dollar? I'm not. Neither is Ken Fisher.

"When we have a current account deficit, it means cash flow is coming to America. The current account deficit happens first. Once the money is here and gets spent, that creates the trade deficit. Current account deficits show that the world thinks it's better to invest in America than to invest in Africa. It's better to invest in America than to invest in Germany. Germany gets the surplus. We get the deficit. That money is actually good for America." Interview with Ken Fisher, Equities Magazine Feb. 2007