Ask professional foreign exchange (forex) trader Ed Ponsi for his view of the United States dollar and his forecast is that it will continue to decline.

In fact, he believes that benchmarked against the greenback, the Singdollar will strengthen to $1.30 from the current $1.35, the yuan will rise to six, while the euro will strengthen to US$1.70 to US$1.75 by the end of the year.

This is why the American is shorting or selling dollars and buying other currencies like the yuan, euro and, in particular, the Hong Kong dollar, as he believes the Hong Kong government will strengthen the HK dollar by re-pegging it against the US dollar within the next one to two years.

Mr Ponsi, 46, was in Singapore recently to publicise his latest book, Forex Patterns And Probabilities. In it, he provides strategies and discusses specific mechanics of currency trading such as the best ways to enter, exit and manage trades.

Besides carrying out his own currency trades and trading on behalf of institutional clients, he is the founder and president of educational firm FXEducator.

'Don't hold greenbacks, as the value of the dollar will go down. Instead, hold things that are valued in US dollars that can appreciate when it falls, like gold and other currencies.

'If you think the dollar will continue to fall, which I do, short it. One way of doing so is to buy a contract on the US dollar Index, which means that you are betting that the dollar will fall against a basket of currencies,' said Mr Ponsi.

However, he cautioned that whatever currency bets investors make, they should never risk more than 2 per cent of their wealth on the bet.

Forex was not his first love. He said he became interested in investing because he used to own a food distribution business that allowed him free time in the early afternoon.

'I would get home and turn on the business channel, and I was fascinated by this whole new world. I decided that I wanted to learn everything I could about trading and the markets,' he recalled.

Egged on by his new passion, he sold his business and became a stockbroker for almost a decade before he discovered the exciting world of forex trading in 2002.

Q: What are your money habits?

I came from a solid middle-class background, and I learnt the value of hard-earned money early on. I was taught to save and to never borrow if I can help it.

After I got involved in trading, I went through a 'big spender' phase, but the thrill wore off pretty quickly.

I don't want to draw attention to myself when I'm out shopping or running errands.

I've found that it just makes other people uncomfortable, especially your old friends. I've managed to remain friends with many of the people from my childhood, and I'm proud of that. Money can create alienation if you allow it to control you.

Q: What financial planning have you done for yourself?

Besides my currency portfolio, I have a stock portfolio made up of mainly blue chips, such as Philip Morris, which I have held for years. I don't jump in and out of the market.

US stocks may not be the best thing to buy right now. I'm looking at steady returns, and I've achieved returns in the low teens in the last few years.

I also have some bond investments. My main income source is forex trading, but I believe that the greatest appreciation will come from real estate over the next few years when my properties will be worth more. That's the sweet spot right now.

Q: What's your investment philosophy?

The important thing is building wealth gradually. I would say my philosophy is to put as much money as you can into appreciating assets, and put as little as you possibly can into depreciating assets.

For instance, right now, I'm looking to spend on real estate, because real estate is depressed in the US and good properties should rise in value, plus some sellers are becoming tremendously motivated, so that's where the best bargains are now.

Q: What are your property investments?

Well, real estate is at the top of my list right now. I've just purchased a condo in the New York area, and now I'm shopping around for a condo in Miami, Florida, right on the waterfront. The prices of two-bedroom condos have fallen to US$500,000 (S$684,000) from US$800,000, and that's a great bargain.

I also have a condo in Mexico City, which I bought a year ago, and a house that I bought years ago in Philadelphia.

I believe in spreading out, so that you don't have all your eggs in one basket.

I'll keep looking to accumulate property until I feel it is no longer the best bargain out there, and then I'll look for whatever takes its place as the best bargain.

Q: Moneywise, what were your growing-up years like?

My parents were and are good, honest, hard-working middle-class people, but my family didn't have a lot of money when I was growing up.

My dad was in government service and my mum was an employee in a big US retailer. I have an older brother.

I've developed a respect for hard work and a disdain for wastefulness that continue to this day. It's great to spend money and have fun, but it's not okay to waste money just because you can afford to do so. That's just foolish.

Q: What has been a bad investment?

I once had a really good investment that turned sour because I held it too long.

I bought 500 shares of a tech stock way back in 1996, and it just kept splitting. After a series of two-for-one and three-for-two splits, by 2000, my little 500 shares had grown into 4,500 shares, and then the company's share price climbed to nearly US$100!

I began to scout around for some beachfront property.

Then, for some reason that I still cannot fathom, I decided to continue holding on to the shares - after all, holding the shares had worked up till then, right? I had no exit strategy, a classic mistake of a beginner.

So, I held the shares instead of buying the beach house. As you can guess, the Nasdaq imploded soon afterwards and my gains evaporated.

Meanwhile, I'm sure the house doubled or tripled in value as the tech bubble was ending and the real estate bubble was just about to begin. That one still hurts.

Q: Your best investment to date?

Shorting the US dollar. If you go back and look at every article I've written and every television programme on which I've appeared, you'll see I've been consistently calling for a weaker US dollar since early last year.

At no point have I purchased US dollars or recommended their purchase. Instead, I've constantly enumerated all of the many reasons why traders should short the US currency.

While this strategy has been consistently profitable over time, the last three months have seen a dollar collapse of epic proportions because of the Fed interest rate cuts, the mortgage mess and the Bear Stearns bailout.

All of the ingredients were there for everyone to see. You would have to be blind not to see it coming, and it's not over yet.

On the US dollar
'Don't hold greenbacks as the value of the dollar will go down. Instead, hold things that are valued in US dollars that can appreciate when it falls, like gold and other currencies.

If you think the dollar will continue to fall, which I do, short it. One way of doing so is to buy a contract on the US dollar Index, which means that you are betting that the dollar will fall against a basket of currencies.'

On property
'I'm looking to spend on real estate, because real estate is depressed in the US and good properties should rise in value, plus some sellers are becoming tremendously motivated, so that's where the best bargains are now.'

On spending wisely
'I've developed a respect for hard work and a disdain for wastefulness that continue to this day.

It's great to spend money and have fun, but it's not okay to waste money just because you can afford to do so. That's just foolish.'

This article was first published in The Straits Times on May 4, 2008

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