Wednesday, May 17, 2006

Switched Half to Cash

This morning I have switched half my portfolio from 50% Fidelity/50% MLIM to 25%Fidelity, 25% MLIM, 25% Euro cash, 25% Australian dollar cash. I base this move on the following chart (click the chart to enlarge):

The key thing to note is that the DJW is now in decline in all currencies (including the USD) and all the declines seem to have come at almost exactly the same ratio.

I have not sold all equites yet as the PNF charts I use have not issued an official sell signal. As such there is still the possibility of more upside in international equites so I have somewhat hedged my position.

As to the choice of currencies, both the Euro and Aussie dollar have shown similar strength. My rational is that as more central banks diversify their holdings and move out of the USD the currency of choice will be the Euro. However, if commodities continue to do well the Aussie dollar will also do well. Hence my decision to split my investment in two componants.


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