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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Condor who wrote (20113)10/17/2004 4:22:57 PM
From: mishedlo  Read Replies (2) of 110194
 
Mish, when you refer to "do well" do you mean in repsect of their currency vs. the $ US or in regards to interest rate returns?

It is actually a complex question.
With foreign govt bonds you have two risks
1) currency risk
2) interest rate risk

If one expects foreign currencies to rise then obviously currency risk is minimal. OTOH if foreign interest rates are rising you will lose on interest rate risk.

The question on the latter is by how much. Will it offset the currency gain. Then again, if I am correct and the world does head into a recession, there will be less demand for copper, wool, steel, etc etc. Perhaps these currencies do not do as well as one might expect. Perhaps these countries stop hiking and start cutting as they lose business to the US because of the weakened US$. If they start cutting you have an interest rate gain. Perhaps you have a currency gain or perhaps not.

When I said well, I meant a good chance for gains in one or more ways, and also as a good hedge against an outright currency play. A well managed international bond/currency fund if there is such a combined thing might be a very good choice.

Let someone experienced handle the complications of trying to manage those risks in multiple simultaneous countries.

Mish
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