Comments on: Claymore responds to questions on CWO

By: Andy

Andy — Fri, 05 Jun 2009 20:04:29 +0000

MJ-
Re. point 3, if you are paying 1-1.5% for currency exchange with your broker, you need another broker ASAP. I’m not going to bother shilling for any specific brokers, but much better rates are available.

Hey, thanks to this site I learned of Norbert’s Gambit… which is a method of achieving a foreign exchange at minimal cost (Google it).

By: Weekend Reading - June 5, 2009 | Million Dollar Journey

Weekend Reading - June 5, 2009 | Million Dollar Journey — Fri, 05 Jun 2009 10:31:29 +0000

[...] Canadian Capitalist gets a response from the president of Claymore Investments regarding some reader questions on CWO. [...]

By: mj

mj — Thu, 04 Jun 2009 20:59:30 +0000

Re. point 3, if you are paying 1-1.5% for currency exchange with your broker, you need another broker ASAP. I’m not going to bother shilling for any specific brokers, but much better rates are available.

By: Canadian Capitalist

Canadian Capitalist — Thu, 04 Jun 2009 15:00:57 +0000

@DM, @Terry: Actually, some brokerages will even allow you to wash your trades in a *registered account*. I’ve written about it in the past:

http://www.canadiancapitalist.com/wash-trades-save-you-money/
http://www.canadiancapitalist.com/how-to-wash-your-trade/

Search for “wash trades” as many brokers in addition to TD Waterhouse offer this now.

By: Terry from Calgary

Terry from Calgary — Thu, 04 Jun 2009 13:52:11 +0000

DM, yes only in non-registered.

By: YYZ

YYZ — Thu, 04 Jun 2009 13:41:37 +0000

How are low-volume ETFs a significant risk for a long-term investor? If Claymore decides to close this fund, what exactly would that entail for the money of those invested?

By: DM

DM — Thu, 04 Jun 2009 02:25:00 +0000

@ Terry, Is this a non-registered account? I think it is. Right now only Questrade allows customers to hold USD in their registered accounts. However, it is only a matter of time before other brokers follow suit and allow customers to directly hold USD in their RSPs. This would make holding VEA (instead of XIN) and VWO (instead of CWO) even more attractive. Still, I’m not comfortable having all of my international and emerging markets exposure in USD so I split it 60% for the USD ETFs and 40% for the CAD ones.

By: Terry from Calgary

Terry from Calgary — Wed, 03 Jun 2009 22:22:39 +0000

As part of my asset allocation strategy, I have US equities. I buy these holdings in Canadian dollars and then transfer them to US dollar based account. This is done at TD Waterhouse with a simple phone call. I can then trade these equities with other US equities and not pay the spread on the buy FX exchange. Upon retirement, sometime in the future, assuming I retire in Canada, I’ll have to pay the spread on the sell FX exchange rate. This is how I minimize and buy/sell FX spreads.

By: Matt

Matt — Wed, 03 Jun 2009 21:09:57 +0000

Dave, using your numbers, during that time frame the Canadian dollar rose about 15% against the USD. If you had purchased XIN.TO, which hedged it’s results back into CAD, then you got the updraft of the Canadian dollar rising.

XIN.TO will outperform EFA when the Canadian dollar rises against USD, and EFA will outperform if the Canadian dollar falls against the USD. That’s because all XIN.TO is is EFA with a hedge to CAD.

By: Canadian Capitalist

Canadian Capitalist — Wed, 03 Jun 2009 21:01:39 +0000

Dave: See my previous comment. EFA returns are not directly comparable to XIN.TO returns because XIN.TO holds EFA and hedges the CAD/EAFE currency basket exposure.

The USD rate for Jan 2007 is incorrect in your calculation. It is 1.1653. So, you’ll have $120.86CAD worth of EFA shares for a 20% price return in 2006. Add in the dividend and you are looking at something close to the 25.5% that the TD e-Series International Index reported in 2006.