Ooh, Not Sure About That

There is a post up at Seeking Alpha by Alligator Investor that I’m not sure is correct, conceptually. The post looks at the volume of all of the Rydex Currency Shares ETF.

The euro, FXE, clearly has the most volume by a mile but I’m not sure I can agree with AI’s conclusion that “FXE is clearly the best choice for a low cost, exchange-traded hedge against a weakening dollar.”

FXE has been the volume leader of the bunch ever since the others were listed in last summer but, to use an analogy, Microsoft is not a better proxy for tech solely by the virtue of having more volume than Qlogic (QLGC).

Those two tech stocks are totally unrelated. The fundamental goings on with the seven different countries behind the currency ETFs may or may not be totally unrelated. Making a decision between several investments based on volume alone doesn’t seem to make sense to me, maybe I am missing something.

The chart captures all of the single currency ETFs. Three other currencies have outperformed the euro; the peso, the Aussie and the British pound. The argument seems to be based on volume, which of course looks back but the volume leader has not been the price leader, not even close. Looking forward the euro may or may not be the top performer but volume in the ETF will not determine what currency does lead.

FXA and FXS are client and personal holdings.


  1. ROGER,

    You seem not to want to answer this. How about telling us about a stock or 2 BEFORE you buy it so we can all track it and maybe even go into it. I see you sold 2 recently for big profits which I am sure is accurate. Please enlighten us with stocks you are to buy in the next few days.

    I ask this out of respect for you, not making light of your claimed successors!!

  2. I answered you the first time you posted your question.

    The goal here is teaching how to fish.

    I chronicle most of the trades I do. In the life of this blog I have written about purchases and sales along the way.

    you probably don’t need to leave the comment any more; six times is probably enough.

  3. Roger,

    SORRY, did not see your prior answers. I will look for the your postings of the next stocks you buy and will follow them. I would appreciate seeing them and I’m sure you want to teach all how you get these large returns.

  4. Roger, Thank you for your comments. I read your blog daily, and I greatly respect and admire your work.

    I agree with you that several currencies have outperformed the euro vs. the dollar. My point is that the associated ETFs are not very liquid and caution is advised.

    Someone who is interested in those particular currencies might be better off investing in individual foreign stocks, FX, or even currency futures.

    But, if someone feels confident investing in Euros, and possibly Swissies, FXE and FXF are viable options which are attractive by virtue of low cost, relatively low risk, and liquidity.

  5. Since when is 40 bps “low cost”? If you trade futures and roll annually, with commisions and spread all-in you probably pay 1 bp.

    Currency trading is cheap. There is no excuse for a 40-bp ETF in currencies.


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