Tuesday, November 25, 2008

Making Money The "Aussie Way"

Making Money The “Aussie Way”

(posted by today’s guest blogger, Professor John W. Kercheval)

Allan tells me that this blog is getting hits from all over the world these days. We all know the famous “Leonidas” from Southern Greece and his amazing ability to pick the cream of the crop of Allan’s trading suggestions. But, my friends, the blog has now officially “Gone Global.”

I know, like most of you when I think of Australia, I think of kangaroos, wallabies (and I’m not really sure what a wallabie really is), Crocodile Dundee and Foster’s Lager- the last thing I think of is putting my money Down Under.

But I’ve been getting a lot of requests about that and the famous investor Jim Rogers, who is featured on this board frequently, whom I have personally corresponded with on numerous occasions, and who is the author of “Investment Biker” and “Adventure Capitalist” seems to love the country from a money making perspective. He considers Darwin to be a “jumping off point” for investing not only in Australia but in all Asian markets in general.

The Australian Dollar has been falling pretty hard against the US dollar and that could make investing Down Under attractive for Americans. Further the opposite could be true. Aussies, seeking to benefit from the USD’s rise against its own currency could buy into the US (following, hopefully Allan’s suggestions on this blog) as a safe haven to hedge against its own currency’s decline.

Here is the chart, it has been a real bloodbath:

How do you trade this? Maybe via a highly leveraged financial instrument not available (to my knowledge) in the US, called CFDs or “Contracts for Difference” they are partially described here:


With not a lot of money (and many of the blog readers I think do not have a large capital base to work with) you can get into these things. My suggestion for trading them is either just to “eyeball” the trend and buy into the CFD in the direction of the trend with trailing stops, using a diversified portfolio of CFDs.

Another option is to use Advanced GET’s False Bar Stochastic to trade these things, again with a diversified portfolio. Advanced GET is a program both Allan and I have and can strongly recommend.

I cannot speak from first hand experience but the link above codes to a global brokerage firm that specializes in these things. Maybe the CFDs are worthwhile, maybe not.

I’m still looking into it myself, and will post any findings later, and would welcome any comments from the readership about these instruments and any positive or negative experiences they have had trading or analyzing them.

Finally, I would like to dedicate this post to my Aussie mates from nearly 1/3 of a century ago, all superlative human beings:

Chris, (Sr.), Jonathan, the lovely Jacinta, Norma, and young Nick all of Perth and above all my best mate Chris, (Jr.) of Sydney who is well on track to be the next “Richard Burton” but (hopefully) without all of the ex-wives.

Professor Kercheval serves part time on the faculty at Georgetown University where he lectures on topics on finance and investments at the undergraduate and MBA levels. Nicknamed “The Grave Dancer,” he is also the owner of the Mid-Atlantic Vulture Capital Fund. With $365MM under management, it is the largest Vulture Capital Fund in existence, which invests in the assets of distressed companies in the aerospace, defense and telecommunications industry groups and provides financial analysis, budgeting and turnaround services to such corporations.


Anonymous said...

So what's the value in this post unless you live in Oz?
Otherwise, keep up the good work,Allan.

Anonymous said...

You are joking, correct?

The value is that these can be traded by US citizens regardless of whether you live in Australia, or The UK or wherever.

This is a global economy and you need only open up a brokerage account that has access to the appropriate international exchanges to trade them.

Are you new to trading?

There are many blogs out there for beginners. And every large bookseller has a section on "Investing" with many publications for novices.

Phil in NYC.

fish747 said...

FXA. It even has options.

Anonymous said...

How's everyone feel about trading against the Euro while we're 25% (somewhere around there) stronger than we were a few months ago?

I would think with the rise in the Euro over the years it would most likely take that direction again.
Heck, 25% is 25% right?

The AU is alright and all but it's looking like it's in bad shape right now. I can't put faith in that.


Marmaduke said...

Hello All:

Just discovered this wonderful blog . I'm i the UK but trade stocks in the US. Focusing on ETFs.

I prefer to trade in The Colonies versus the more civilized UK. There is greater liquity and range of instruments in The Colonies.

Dr. Marmaduke Weatherall

abot said...

Is it that bad Dr MW?

So people from the colonies have been buying the flagship UK companies and left you with little to trade?

RMC to the mexicans, Harrods to Egiptians, Rover to the Indians and much else to the americans.