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Wednesday, November 5, 2014

SPY looks great if you're not an American


Here's the great thing about an appreciating US dollar:


For a Canadian like me, that there chart makes investment in the US equities a no-brainer.

Note how the above chart looks just like the chart of VFV.to, a Toronto-listed S&P 500 index unhedged ETF:



How does the ex-USD S&P 500 chart look over the longer term?



That's about a 100% gain in 3 years. Tell me how many Europeans and Japanese and Chinese won't want to take advantage of that sort of strength.

So in an era of appreciating USD, the US market outperforms non-US markets when viewed from their local vantage points. And thus the US wins all the world's capital.

I'm US-unhedged (VFV.to) and Japan-hedged (CJP.to) right now, and man this new era of volatile currency movements is making me feel damn good.

Unfortunately my R2K position (XSU.to) is US-hedged. So I'm wondering what to do about that. No point trying to capture the superior upside of small-cap if it just gets bled off in currency hedging, right?

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