Dec 08 2009
My currency hedge is getting pulled
Yesterday I said I wasn’t going to pull my currency hedge.
My currency hedge consists of MERKX in my Roth IRA and in a non-retirement account. Both positions are getting pulled tomorrow. I don’t like the price action I am seeing in the US dollar, gold, and oil.
I really do not take this decision lightly since the currency hedge represents 20% of my net assets. I am usually hesitant to make drastic changes in my portfolio allocation. However, I also realize that if the currency hedge goes against me, it will go against me quickly and I either have to get out fast or not at all.
Big changes in my portfolio are usually mistakes. I cannot control which investments will be profitable, but I can protect gains in investments that are profitable by getting out. So even though this is a big move, I feel comfortable in making this big move. Can the US dollar continue to decline? Yes. But I don’t think the risk of betting it will continue to decline is worth the potential reward. I just don’t see it. I could be wrong, but with the given information at this time, I am not going to have any regrets about dumping my currency hedge.
If I really want to put a currency hedge back on, there are other ways to do it. MERKX is too expensive of a fund.
So what am I going to do with the new money lying around? I have no idea. Panic and sell first. Ask questions later. I am pretty sure that I will not make a decision until next year.
UPDATE (following day): I think I’ve already decided what to do with the money. Non-retirement account money is going to beef up the emergency fund. Roth IRA money is going into intermediate term treasuries in the form of VFITX. It has been two years since the last time I owned this fund.
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