Forum Archive Index - November 2003

[mixtrader <mixtrader@clear.net.nz>]

Hi Alan

 

Losing money doesn't do much for my humour either but I do try to learn from my mistakes and have been given plenty of opportunities to learn over the years.

 

On the information you have provided it looks as if you were compounding an initial mistake in timing of the buy and sell of stocks by immediately reentering the market to try and recapture the momentum.  In my view this often leads to tears with the only real winners being the brokers and FX dealers (bank).

 

Your $700 daily gain represents about 1% of your investment from which you must deduct two commissions for share transactions and any costs involved in currency transactions which will include the impact of changing currency values on the spot market and the difference between the buy and sell value of the currencies at the times that you make transactions.  I would suggest that this would all eat into the 1% profit you had made on the day and would certainly provide the potential of a loss, especially if there was a 1% move in the currency over that day.

 

While I am not sure of the tax implications of doing it, operating an Australian bank account for ASX trades seems a logical idea.  To my way of thinking our currency is overvalued at present, so converting some to Aus$'s and putting it in a bank there provides opportunities of FX gains if our currency drops relative to Aus.  You also avoid the problem of having to convert each time you make a trade on ASX - effectively providing two portfolios, one in Australia and one in New Zealand.  This would also enable you to time currency repatriation to take best advantage of prevailing exchange rates.

 

I hope this is of some assistance.  I am sure that there are others in the forum with great experience in this area, perhaps they might contribute their views to increase the range of strategies available.

----- Original Message -----

From: Russell

To: sharechat@sharechat.co.nz

Sent: Saturday, November 08, 2003 8:58 AM

Subject: Re: [sharechat] A$ to NZ$ exchange rates

  I suspect you have it, I don't have the skills to go back in the historical records, but to give the real life example that started me weeping tears of blood over this issue. It was the day before AMP jumped up $1.00 per share, I was a little wary of things and held 15000 AMP shares in NZ and AUS, I was wary as the tue or wed before the price had fallen wiping out my profit on their announcement of a loss, the announcement had been signalled on the fri in the Sydney morning herald. [please bear with me the history helps explain my actions]. As a result I was watching things closely, and put in a sale order and was raising it as the price came up, [ not using a trailing stop as I should have been] any way as I got busy around the house my NZ AMP sold, which ticked me off, so being of a tidy [but illogical ] mind I sold AUS AMP as well. To see them go up just before market closing time, and then go up by $1.00 the next day.

I tried to catch the bus I had missed, threw [ball park figures] $70000.00 to AMP aux made $700.00 that day brought it back made a loss.

I suspected a bank mistake but spent some time going through the records, no mistake.

Don't normally wear my heart on my sleeve with boo hoo stories however, I'm a sick patient and the doctor needs to know what's ailing, and losing money makes me very unwell.

Many thanks 

Allan      

----- Original Message -----

From: mixtrader

To: sharechat@sharechat.co.nz

Sent: Friday, November 07, 2003 5:40 PM

Subject: Re: [sharechat] A$ to NZ$ exchange rates

Hi Alan

 

I might be that I am mis-interpreting your query so before I try and answer fully can I pose a scenario and see if that is what you are attempting

 

Say purchase shares on ASX at a total value (including brokerage) of $A100.

 

That is equivalent to $NZ115.26 (at current 0.8676 exchange rate) so you are paying $115.26 from NZ to purchase your parcel on ASX

 

Later sell that parcel on ASX at net $A120

 

This represents a 20% gain for the holding period (your tidy profit)

 

Transfer those funds to NZ domiciled account, represents $NZ138.31 (assuming no variation to exchange rate), the same 20% gain as reflected by the gross in $A.

 

If there has been a divergence in exchange rates over the period (ie NZ$ buys 1 $Aus) much of your gain is lost (ie getting 120 back for 115 invested) but there hasn't been that much movement between the currencies that I can think of lately

 

The only other variation I can think of is the difference between the buy rate and the sell rate for each currency as you make transactions.

 

Is this the type of problem you are faced with or have I missed the boat?

----- Original Message -----

From: Russell

To: sharechat

Sent: Friday, November 07, 2003 4:53 PM

Subject: [sharechat] A$ to NZ$ exchange rates

 

Could any one please help on this one, I can look up the exchange rate as well as any one else, but where I fall down is buying or selling on aux or nzx with $ visa versa.

One day I saw a tidy profit in $A wiped out simply by putting the money in a NZ account. Obviously profits can be enhanced and losses minimized by "doing it right" at present my method is  hit or miss, hands off no control [i.e. not right].

I contacted the bank as I thought they were charging an exchange rate , they don't.

I need a programe that not only does the exchange rate but one that will indicate from a benchmark, if I am trying to swim up hill or not.

Or maybe I just need to understand better what I'm doing, for some reason its just not that obvious [at the moment].  

 

Many Thanks

 

Allan.