Question 1: Is there an easy way to be short the US dollar?
Answer: There is no easy way to be short the US dollar (that is, to benefit from a fall in the value of the US dollar). There are futures markets – but they are very difficult for retail investors to access.
Of course, if you are “long” Australian dollars, you are effectively “short” US dollars.
Beta Shares has an exchange traded fund, the BetaShares Strong Australian Dollar Fund (AUDS) that is geared to a stronger Australian dollar (weaker US dollar). Gearing is a factor of 2.0 to 2.75 times (that is, if the AUD appreciates by 1% against the US dollar, the ETF should increase in value by 2.0% to 2.75%). AUDS trades on the ASX.
If you have investments offshore, consider currency-hedged options. By currency hedging, you are eliminating the risk that the US dollar might weaken (Australian dollar going up). You will, however, take away the upside of an appreciating US dollar (weakening Australian dollar).
Question 2: I have $100k to invest and cannot put more money into super. I will be buying shares in my name. Would you be able to suggest 5 companies mainly for income and long-term holding? Perhaps a company like JB Hi-Fi (JBH)?
Answer: For income and a bit of growth (and diversification), try these (for the long term): Commonwealth Bank (CBA), Macquarie Bank (MQG); BHP Group (BHP); Goodman Group (GMG) and Wesfarmers (WES). I would probably throw CSL into the list but you might not like the income in the short term.
I wouldn’t say “no” to JB Hi-Fi, but probably not in a portfolio of just 5 or 6 stocks. Wesfarmers is a little less risky.
Question 3: I am thinking about buying Qantas (QAN). What do the analysts say?
Answer: According to FNArena, the brokers are pretty bullish on Qantas. Of the six major brokers that cover the stock, 5 have “buy” recommendations and 1 has a “sell” recommendation.
The consensus target price is $6.37, about 23.7% higher than the last ASX price of $5.15. The range is a low of $4.72 from Citi up to a high of $7.45 from Ord Minnett (JP Morgan).
Question 4: What is the 2-year/10-year bond spread that the US market commentators are focussing on? Why does a negative spread suggest a recession?
Answer: The 2-year/10-year bond spread is the difference (in basis points) between the 10-year US Government bond yield and the 2-year US Government bond yield. For example, if the US 10-year bond has a yield of 3.80%, and a 2-year US bond has a yield of 4.20%, the spread is -40 basis points (-0.40%).
Normally, yield curves are positive sloping. That means a 10-year bond has a higher yield than a 7-year bond which has a higher yield than a 5-year bond which has a higher yield than a 2-year bond. Occasionally, yield curves go negative (that is the longer you go, the lower the yield). Negative yield curves are associated with predictions of recession because the market expects that in time, as the economy slows, the Central Bank will ease interest rates to stimulate the economy.
At the moment, the US Federal Reserve is increasing interest rates. But the bond market looks forward and is assuming that in about 18 to 24 months, the US Federal Reserve will be easing interest rates. That’s why commentators say that the market is predicting a recession.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.