If
hedging currency costs 1.5 % to 2 % every year, the drag is so large that a currency has to depreciate a lot just to break even.
Not exact matches
Important factors that could cause actual results to differ materially from those reflected in such forward - looking statements and that should be considered in evaluating our outlook include, but are not limited to, the following: 1) our ability to continue to grow our business and execute our growth strategy, including the timing, execution, and profitability of new and maturing programs; 2) our ability to perform our obligations under our new and maturing commercial, business aircraft, and military development programs, and the related recurring production; 3) our ability to accurately estimate and manage performance,
cost, and revenue under our contracts, including our ability to achieve certain
cost reductions with respect to the B787 program; 4) margin pressures and the potential for additional forward losses on new and maturing programs; 5) our ability to accommodate, and the
cost of accommodating, announced increases in the build rates of certain aircraft; 6) the effect on aircraft demand and build rates of changing customer preferences for business aircraft, including the effect of global economic conditions on the business aircraft market and expanding conflicts or political unrest in the Middle East or Asia; 7) customer cancellations or deferrals as a result of global economic uncertainty or otherwise; 8) the effect of economic conditions in the industries and markets in which we operate in the U.S. and globally and any changes therein, including fluctuations in foreign
currency exchange rates; 9) the success and timely execution of key milestones such as the receipt of necessary regulatory approvals, including our ability to obtain in a timely fashion any required regulatory or other third party approvals for the consummation of our announced acquisition of Asco, and customer adherence to their announced schedules; 10) our ability to successfully negotiate, or re-negotiate, future pricing under our supply agreements with Boeing and our other customers; 11) our ability to enter into profitable supply arrangements with additional customers; 12) the ability of all parties to satisfy their performance requirements under existing supply contracts with our two major customers, Boeing and Airbus, and other customers, and the risk of nonpayment by such customers; 13) any adverse impact on Boeing's and Airbus» production of aircraft resulting from cancellations, deferrals, or reduced orders by their customers or from labor disputes, domestic or international hostilities, or acts of terrorism; 14) any adverse impact on the demand for air travel or our operations from the outbreak of diseases or epidemic or pandemic outbreaks; 15) our ability to avoid or recover from cyber-based or other security attacks, information technology failures, or other disruptions; 16) returns on pension plan assets and the impact of future discount rate changes on pension obligations; 17) our ability to borrow additional funds or refinance debt, including our ability to obtain the debt to finance the purchase price for our announced acquisition of Asco on favorable terms or at all; 18) competition from commercial aerospace original equipment manufacturers and other aerostructures suppliers; 19) the effect of governmental laws, such as U.S. export control laws and U.S. and foreign anti-bribery laws such as the Foreign Corrupt Practices Act and the United Kingdom Bribery Act, and environmental laws and agency regulations, both in the U.S. and abroad; 20) the effect of changes in tax law, such as the effect of The Tax Cuts and Jobs Act (the «TCJA») that was enacted on December 22, 2017, and changes to the interpretations of or guidance related thereto, and the Company's ability to accurately calculate and estimate the effect of such changes; 21) any reduction in our credit ratings; 22) our dependence on our suppliers, as well as the
cost and availability of raw materials and purchased components; 23) our ability to recruit and retain a critical mass of highly - skilled employees and our relationships with the unions representing many of our employees; 24) spending by the U.S. and other governments on defense; 25) the possibility that our cash flows and our credit facility may not be adequate for our additional capital needs or for payment of interest on, and principal of, our indebtedness; 26) our exposure under our revolving credit facility to higher interest payments should interest rates increase substantially; 27) the effectiveness of any interest rate
hedging programs; 28) the effectiveness of our internal control over financial reporting; 29) the outcome or impact of ongoing or future litigation, claims, and regulatory actions; 30) exposure to potential product liability and warranty claims; 31) our ability to effectively assess, manage and integrate acquisitions that we pursue, including our ability to successfully integrate the Asco business and generate synergies and other
cost savings; 32) our ability to consummate our announced acquisition of Asco in a timely matter while avoiding any unexpected
costs, charges, expenses, adverse changes to business relationships and other business disruptions for ourselves and Asco as a result of the acquisition; 33) our ability to continue selling certain receivables through our supplier financing program; 34) the risks of doing business internationally, including fluctuations in foreign current exchange rates, impositions of tariffs or embargoes, compliance with foreign laws, and domestic and foreign government policies; and 35) our ability to complete the proposed accelerated stock repurchase plan, among other things.
Such
hedging functions have particularly unique promise because of the extremely low transaction
costs of peer - to - peer
currency.
Currency risk in a carry trade is seldom hedged, because hedging would either impose an additional cost, or negate the positive interest rate differential if currency forwards a
Currency risk in a carry trade is seldom
hedged, because
hedging would either impose an additional
cost, or negate the positive interest rate differential if
currency forwards a
currency forwards are used.
To some extent, these concerns are allayed by the existence of natural
hedges, such as foreign
currency export income, although rising US dollar - denominated debt servicing
costs at a time of falling US dollar - denominated commodity revenues would obviously be problematic.
Adjusted EPS is defined as diluted earnings per share excluding, when they occur, the impacts of integration and restructuring expenses, merger
costs, unrealized losses / (gains) on commodity
hedges, impairment losses, losses / (gains) on the sale of a business, nonmonetary
currency devaluation and timing impacts of preferred stock dividends.
Adjusted EBITDA is defined as net income / (loss) from continuing operations before interest expense, other expense / (income), net, provision for / (benefit from) income taxes; in addition to these adjustments, the Company excludes, when they occur, the impacts of depreciation and amortization (excluding integration and restructuring expenses)(including amortization of postretirement benefit plans prior service credits), integration and restructuring expenses, merger
costs, unrealized losses / (gains) on commodity
hedges, impairment losses, losses / (gains) on the sale of a business, nonmonetary
currency devaluation (e.g., remeasurement gains and losses), and equity award compensation expense (excluding integration and restructuring expenses).
Adjusted EPS is defined as diluted earnings per share excluding, when they occur, the impacts of integration and restructuring expenses, merger
costs, unrealized losses / (gains) on commodity
hedges, impairment losses, losses / (gains) on the sale of a business, and nonmonetary
currency devaluation (e.g., remeasurement gains and losses), and including when they occur, adjustments to reflect preferred stock dividend payments on an accrual basis.
Adjusted EPS is defined as diluted earnings per share excluding, when they occur, the impacts of integration and restructuring expenses, merger
costs, unrealized losses / (gains) on commodity
hedges, impairment losses, losses / (gains) on the sale of a business, nonmonetary
currency devaluation (e.g., remeasurement gains and losses), and U.S. Tax Reform, and including when they occur, adjustments to reflect preferred stock dividend payments on an accrual basis.
But we sometimes
hedge our asset class views through the adoption of a
currency -
hedged ETF — the
cost of that is essentially the insurance premium you pay in case our broad asset class views turn out to be incorrect due to monetary - and macro-regime policies.
U.S. Treasuries are becoming less attractive to non-U.S. investors, as the increased
cost of
currency hedging is wiping out the extra yield Treasuries offer.
Adjusted EBITDA and segment Adjusted EBITDA reflect adjustments for interest expense, net, income tax expense (benefit), depreciation and amortization, including accelerated depreciation, and the following adjustments discussed above: non-cash mark - to - market adjustments and cash settlements on interest rate swaps, provision for legal settlement, transaction
costs and integration
costs, restructuring and plant closure
costs, assets held for sale, inventory valuation adjustments on acquired businesses, mark - to - market adjustments on commodity and foreign exchange
hedges and foreign
currency gains and losses on intercompany loans.
In theory the performance of the
hedge class NAV will track the
currency of the base class NAV, in practice they will differ slightly due to factors such as the timing (the FX
currency contracts used to provide the
hedge will generally be executed using the NAV of the on the previous day) and
costs of the
hedging.
Our analysis shows that gold can be a
cost effective EM -
currency hedge, helping investors reduce portfolio losses during periods of heightened risk.
Examples of these risks, uncertainties and other factors include, but are not limited to the impact of: adverse general economic and related factors, such as fluctuating or increasing levels of unemployment, underemployment and the volatility of fuel prices, declines in the securities and real estate markets, and perceptions of these conditions that decrease the level of disposable income of consumers or consumer confidence; adverse events impacting the security of travel, such as terrorist acts, armed conflict and threats thereof, acts of piracy, and other international events; the risks and increased
costs associated with operating internationally; our expansion into and investments in new markets; breaches in data security or other disturbances to our information technology and other networks; the spread of epidemics and viral outbreaks; adverse incidents involving cruise ships; changes in fuel prices and / or other cruise operating
costs; any impairment of our tradenames or goodwill; our
hedging strategies; our inability to obtain adequate insurance coverage; our substantial indebtedness, including the ability to raise additional capital to fund our operations, and to generate the necessary amount of cash to service our existing debt; restrictions in the agreements governing our indebtedness that limit our flexibility in operating our business; the significant portion of our assets pledged as collateral under our existing debt agreements and the ability of our creditors to accelerate the repayment of our indebtedness; volatility and disruptions in the global credit and financial markets, which may adversely affect our ability to borrow and could increase our counterparty credit risks, including those under our credit facilities, derivatives, contingent obligations, insurance contracts and new ship progress payment guarantees; fluctuations in foreign
currency exchange rates; overcapacity in key markets or globally; our inability to recruit or retain qualified personnel or the loss of key personnel; future changes relating to how external distribution channels sell and market our cruises; our reliance on third parties to provide hotel management services to certain ships and certain other services; delays in our shipbuilding program and ship repairs, maintenance and refurbishments; future increases in the price of, or major changes or reduction in, commercial airline services; seasonal variations in passenger fare rates and occupancy levels at different times of the year; our ability to keep pace with developments in technology; amendments to our collective bargaining agreements for crew members and other employee relation issues; the continued availability of attractive port destinations; pending or threatened litigation, investigations and enforcement actions; changes involving the tax and environmental regulatory regimes in which we operate; and other factors set forth under «Risk Factors» in our most recently filed Annual Report on Form 10 - K and subsequent filings by the Company with the Securities and Exchange Commission.
CCA's
cost increases are lower than those at Schweppes because CCA pays for soft drink concentrate in Australian dollars rather than US dollars and
hedges its commodity and
currency exposure.
«With this launch today, investors who desire the benefits of
currency hedged ETFs now have the option of obtaining them at a substantially lower
cost than similar ETFs in the market.»
But Mark Yamada says investors with a time horizon beyond five years should choose unhedged funds because «the
cost of
hedging can be high unless you have a view towards the
currency.»
I have no view on the direction of
currency movements, but I do prefer unhedged equity ETFs, because
currency diversification can lower the volatility of a portfolio, and the
cost of
hedging is a long - term drag on returns.
While management fees are the biggest culprit, a low - fee ETF may still lag its index significantly because of other
costs, such as
currency hedging (more on this later).
As in 2016, our two Vanguard picks provide low -
cost exposure to this key asset class in both
currency -
hedged (VSP) and unhedged (VFV) versions: Vanguard S&P 500 Index ETF (CAD -
hedged) trading under the ticker VSP; and Vanguard S&P 500 Index ETF, trading as VFV.
CWO also
hedges the
currency exposure of the fund, which is of dubious benefit given the high
costs involved in the form of tracking errors.
DM: I personally think that the debatable benefits of
currency hedging for long - term investors are vastly outweighed by the high
costs in the form of tracking errors.
However, investors prefering not to
hedge their
currency exposure have little choice but to access these markets through ETFs such as Vanguard Europe Pacific ETF (VEA) available in the U.S.. However, by investing in the U.S., Canadian investors are exposed to U.S. Estate Taxes and
currency conversion
costs.
[Long time readers know that I'm not a fan of
currency hedging (See The Costs of Currency Hedging and The Costs of Currency Hedging:
currency hedging (See The Costs of Currency Hedging and The Costs of Currency Hedging:
hedging (See The
Costs of
Currency Hedging and The Costs of Currency Hedging:
Currency Hedging and The Costs of Currency Hedging:
Hedging and The
Costs of
Currency Hedging:
Currency Hedging:
Hedging: Taxes).
The cheapest TSX - listed ETF offering U.S. market exposure
costs 0.24 per cent to own, although that includes the benefit of
currency hedging to block out distortions caused by changes in the Canada-U.S. exchange rate.
That was a lucky accident: over the long term one should expect
currency hedging to cause a drag on returns because of its significant
cost.
As an individual investor I think there is very little gain in trying to either
hedge currency (because of
cost) or predict it (because no one can do it accurately).
As the
cost of
hedging is minimal and the growth prospects of holding foreign
currency are non-existent, I would suggest holding
currency neutral investments.
Do the published managment fees include the
cost of
currency hedging for the US and International funds, or is that a separate
cost taken from the ETF's assets?
Any difference is the «
cost of
hedging US / Loonie
currencies.
Also, the
cost of
hedging many growth markets»
currencies is prohibitively high.
Even if you are convinced of the need for
hedging the
currency exposure, there is one reason for thinking twice about
hedging:
cost.
If that is is the case, the
cost of
hedging (by bearing the
cost of interest rate differential) is neutralized by the
currency fluctuations for the long - term investor.
However, as one reviews the philosophical and practical reasons against
currency hedging, it is our conclusion the
costs outweigh the benefits.
Lastly, I don't buy the arguement that
currency hedging costs around 1.0 % per annum.
This is one of the earlier posts I wrote and you are right that MER differences are not the only
cost in holding
currency -
hedged ETFs.
I have read that
currency hedging costs are not included in the MER (https://secure.globeadvisor.com/servlet/ArticleNews/story/gam/20090606/STMAIN06ART1915).
It seems unrealistic that
currency hedging can be achieved with only 0.15 %
cost, especially with the large CAD / USD exchange rates changes seen over the last decade.
This structure typically reduces the
cost and tracking error * associated with replicating an index and increases tax efficiency • Tax efficient: HTH is not expected to make taxable distributions •
Hedged exposure: Get Canadian currency - hedged ** exposure to the US 7 - 10 year treasury market • Higher compound growth: The reinvestment of index distributions are reflected in HTH's Net Asset Value («NAV&r
Hedged exposure: Get Canadian
currency -
hedged ** exposure to the US 7 - 10 year treasury market • Higher compound growth: The reinvestment of index distributions are reflected in HTH's Net Asset Value («NAV&r
hedged ** exposure to the US 7 - 10 year treasury market • Higher compound growth: The reinvestment of index distributions are reflected in HTH's Net Asset Value («NAV»)
As long as some portion of an investor's portfolio is in foreign stocks, evidence suggests that those stocks should not be
currency - hedged for three reasons: (1) Currency unhedged portfolios are not much more volatile than currency - hedged ones (and less volatile for US markets) and (2) Currency hedging appears to add about 1 % extra cost and (3) Some currency unhedged positions reduce overall portfolio vol
currency -
hedged for three reasons: (1)
Currency unhedged portfolios are not much more volatile than currency - hedged ones (and less volatile for US markets) and (2) Currency hedging appears to add about 1 % extra cost and (3) Some currency unhedged positions reduce overall portfolio vol
Currency unhedged portfolios are not much more volatile than
currency - hedged ones (and less volatile for US markets) and (2) Currency hedging appears to add about 1 % extra cost and (3) Some currency unhedged positions reduce overall portfolio vol
currency -
hedged ones (and less volatile for US markets) and (2)
Currency hedging appears to add about 1 % extra cost and (3) Some currency unhedged positions reduce overall portfolio vol
Currency hedging appears to add about 1 % extra
cost and (3) Some
currency unhedged positions reduce overall portfolio vol
currency unhedged positions reduce overall portfolio volatility.
On an institutional investor level, the pure transactional
cost of
currency hedging is extremely low — below 0.2 % per annum, possibly below 0.1 % (i.e. covered by the incremental MER).
My spider sense always makes me suspicious of consistent predictable drags on returns such as MERs and
currency -
hedging costs.
I wonder if anyone has thoughts about using forex to put up a crude
hedge against
currency risk for a fairly low
cost.
Someone who is an expert can weigh in on the all - in
costs of
hedging currency positions.
Now you have
hedging costs plus the
currency change to factor in.
The moment we run the same analysis but subtract a fee from the U.S. index returns to represent the implicit
costs of
currency hedging, we notice an entirely different result.
Trying to
hedge tactically, by predicting
currency movements, is a form of active management which you would expect to increase your risks,
costs, and taxes.
If this 2.0 % tracking error is an implicit
cost of insurance for
hedging away
currency fluctuations between the U.S. dollar and the Canadian dollar, the additional drag may make it highly unlikely that a
currency -
hedged U.S. ETF will outperform an unhedged U.S. ETF over the long term.
But
hedging costs money, which adds up over the long term, and
currency fluctuations tend to even out over very long periods.