5 ms·
Where did we end up if shorting your currency is the only way to go? I could not sleep well with the potentially unbounded loss
by WanderPanda 5y ago
Where did we end up if shorting your currency is the only way to go? I could not sleep well with the potentially unbounded loss
- imtringued 5y agoYou short the USD by borrowing in USD, spending USD while it is still valuable and then wait for it to devalue. Deflation is a bad thing so the Fed won't let it happen. Of course the flaw with this is that I get 4% interest on personal loans so I actually can't make money off of this strategy.
- AnimalMuppet 5y agoGold. Gold essentially functions as a short on paper currency. If you're wrong, you'll lose money, but it won't be an unbounded loss.
- throw0101a 5y agoGold isn't as much of a hedge as most people think. Two papers by Erb & Harvey cited in the podcast: * https://www.nber.org/papers/w18706 https://www.nber.org/papers/w18706 * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2639284 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2639284