Like I Predicted, Us Dollar Is Down, Down, Down!

[TRIPxCORE]

I believe I have been one of the few people here calling for a decline of Greenback while Asian currencies start a nice run-up. With the G-7 meeting recently over, they are paving the way for this. Let us read this tidbit:

Our first full day of trading after the G-7 announcement, and traders didn't disappoint us. As one would expect after the G-7 said it was "critical" that the Asian currencies appreciated against the dollar, the Japanese yen led the Asian contingent higher. The euro did its bit to gain VS the dollar too, as it traded over the 1.24 level briefly yesterday afternoon...

Yesterday, I was all seashells and balloons over the G-7 communiqué' that called for Asian currency appreciation VS the dollar that I completely dropped the ball on the other part of the G-7 communiqué'! My bad! Here's the skinny... G-7 has gotten out of the business of trying to manage the global imbalances & currencies... Instead, they have handed the baton to the IMF... From now on, it will be the IMF that has the "con" and judging from the things I've heard in the past from the IMF... This is going to be a real "war of words"!

I believe the IMF will do a far better job (how could it be any worse?) than the G-7 finance ministers... The IMF likes to get in "there" and act like they know what they're doing, which is far better than sitting back on your G-7 throne and asking for currency flexibility! The transfer of power reflects the fact that the world's major currency strains are not confined to G-7 currencies, but instead relate to China and the rest of Asia. Obviously the jury is still out on this, and will for some time to come... But I would certainly look for further gains in the Asian currencies as a result...

U.S, Treasury Secretary Snow gave us this tidbit yesterday when talking about the global imbalances... "The U.S., by itself, cannot and should not be expected to resolve the problem, but we, like other major participants in the global economy have an important role to play."

I laughed out loud when I saw this... But I think our Corporate FX guy, Ashish, said it best... "Sure we can create it by ourselves, but expect to dole it out when it comes to fixing it."

In a follow up from yesterday's story about the Russian Finance Minister that dissed the dollar as the "absolute Reserve Currency"... There's a story going around this morning that BNP Paribas is expecting Central Banks to sell dollar reserves... "Even a small reallocation amongst Central Banks could have a very negative impact on the dollar", said Ian Stannard, a currency strategist at BNP Paribas...

[JimmyGreaves]

Yep you did warn us TRIPxCORE. Sixth sense you have.

[jing jing]

The question is, what to do if you live in Asia but your assets and income are in dollars?

[JimmyGreaves]

Most farangs have that problem and there are many threads on it in the forum. Diversify seems to be the answer. "Don't hold all your eggs in 1 basket" Easier said than done if you don't understand global markets!

[jing jing]

My eggs are far from being in one basket, but unfortunately all the baskets are American at the moment. I just moved here for keeps about 6 months ago. Diversification is obviously part of the solution but that's a pretty broad term... the specifics are where it gets tricky.

[Mighty Mouse]

I don't know how long ago you "told us so" but Warren Buffett has been betting on a US $ fall since 2003.

His Berkshire Hathaway has a $20 billion bet in favor of the euro, the pound and six other foreign currencies.

Billy Gates has also put his money on the same prediction.

[jing jing]

Buffet and Gates... them's some heavy hitters. So how does the little guy hedge against a dollar decline? Buy Berkshire and Microsoft? There's got to be a more direct way.

[tjo o tjim]

The decline in the dollar is inevitable, but it seems to be overstated compared to the Baht right now. At an annualized rate, the current trend suggests a 38% drop in value of the dollar compared to the Baht. That just doesn't make sense-- that would put us around 27 Baht/USD at year end! I could see a 10% drop lasting, but what the he1l would justify the Baht gaining that much long-term?!

Likewise, the problems aren't unique to the dollar-- the Euro has many of the same problems and risk. GBP might be a little more stable for now, but the same underlying problems exist.

From an investment standpoint, I still can't imagine putting real money into Thai stocks, and clearly there is a property bubble in the works for much of the country.

I think the next few months will see a good deal of volatility, but I still have trouble believing that the current Baht/USD trend will last long term.

[naka]

My eggs are far from being in one basket, but unfortunately all the baskets are American at the moment. I just moved here for keeps about 6 months ago. Diversification is obviously part of the solution but that's a pretty broad term... the specifics are where it gets tricky.

Not difficult really. You can buy Mutual Funds/Unit Trusts or Property Trusts which invest in the European, Japanese or some other markets. You can buy with dollars but as you

are investing in foreign markets you gain the benefits if their currencies rise against the

US Dollar.

You can also simply open a foreign currency fixed term deposit or Bond.

All very straightforward.

Naka.

[mark45y]

My eggs are far from being in one basket, but unfortunately all the baskets are American at the moment. I just moved here for keeps about 6 months ago. Diversification is obviously part of the solution but that's a pretty broad term... the specifics are where it gets tricky.

Not difficult really. You can buy Mutual Funds/Unit Trusts or Property Trusts which invest in the European, Japanese or some other markets. You can buy with dollars but as you

are investing in foreign markets you gain the benefits if their currencies rise against the

US Dollar.

You can also simply open a foreign currency fixed term deposit or Bond.

All very straightforward.

Naka.

If seasonal trends are driving the dollar it should be at 40 or 41 in July if you use last year as a model. I would think the time to get out of dollars would be this summer.

I have foreign currency accounts in offshore banks in Singapore but I don’t know of one who allows an account in Baht to earn interest. Does anyone know of a Singapore bank that allows Baht account to earn interest?

[usatrader]

Even a great hitter can strike out on a low inside split fingered fast ball. hey!

For the record:

Posted to the web on: 24 March 2006

Street Dogs: Feels like autumn

WARREN Buffett, “the Oracle of Omaha,” issued his annual letter to shareholders recently. It contains the usual folksy missives and investment insights, but there was a slightly autumnal air about it. Although he assures us he feels" terrific," he discusses his eventual retirement and indicates he has a successor in mind.

And while Buffett’s company modestly outperformed the S&P 500 index last year, gaining 6,4% to the S&P 500’s 4,9%, you can’t help wondering if he hasn’t lost some of his legendary touch.

Buffett’s big bet on a falling dollar conflicted with his own advice to avoid following the herd. And, sure enough, that strategy proved costly. Berkshire Hathaway made a $955m loss on its foreign currency positions. Fortunately, investing in foreign (non-US) markets nonetheless paid off.

The effect of the strong dollar was more than offset last year by big rallies in most foreign markets. This year, while Buffet still argues that the huge US foreign account deficit means trouble for the dollar eventually, he’s closed out some of his currency positions and makes the case instead for owning foreign equities. Again, it smacks of the type of conventional wisdom Buffett teaches us to be wary of.

http://www.businessday.co.za/articles/mark...x?ID=BD4A174678

I get the impression some here adhere to the notion that a lower dollar is but a death nil for the US.

I point out another possibility in an old proverb. Which says As one door shuts, yet, another opens. Price competitveness is more often than not the Mecca for exports and price non-compeitiveness is a likely death nil for surplus exporters who have difficulty finding markets that cna afford their currency highr priced products.

For example, China alone, using currency manipulation and thusly price competitiveness, is literally taking export monies that not long ago went to places like Thailand and most of Asia including Korea and even Japan.

[cclub75]

I have foreign currency accounts in offshore banks in Singapore but I don’t know of one who allows an account in Baht to earn interest. Does anyone know of a Singapore bank that allows Baht account to earn interest?

OCBC, DBS... they all offer time deposit accounts in THB.

http://www.dbs.com/ratesonline/fdacu.html

[TRIPxCORE]

Yep you did warn us TRIPxCORE. Sixth sense you have.

Thank you but not really a sixth sense. What I have is the knowledge and experience of a long-time investor in foreign investments.

I don't know how long ago you "told us so" but Warren Buffett has been betting on a US $ fall since 2003.

His Berkshire Hathaway has a $20 billion bet in favor of the euro, the pound and six other foreign currencies.

Billy Gates has also put his money on the same prediction.

I started investing large sums of my own, personal money away from USD and into foreign currency bonds in early 2002, way before Buffett or Gates! Started out in NZD, then into EUR and currently into JPY.

Buffet and Gates... them's some heavy hitters. So how does the little guy hedge against a dollar decline? Buy Berkshire and Microsoft? There's got to be a more direct way.

There are quite a few ways to do this. If you are not comfortable taking your money out of America, there is a banking institution based in St. Louis that deals with foreign currency named Everbank. This is the website for them: Everbank Otherwise, you can search for a bank in Europe somewhere to handle your investments. This is what I do.

Even a great hitter can strike out on a low inside split fingered fast ball. hey!

For the record:

Posted to the web on: 24 March 2006

Street Dogs: Feels like autumn

WARREN Buffett, “the Oracle of Omaha,” issued his annual letter to shareholders recently. It contains the usual folksy missives and investment insights, but there was a slightly autumnal air about it. Although he assures us he feels" terrific," he discusses his eventual retirement and indicates he has a successor in mind.

And while Buffett’s company modestly outperformed the S&P 500 index last year, gaining 6,4% to the S&P 500’s 4,9%, you can’t help wondering if he hasn’t lost some of his legendary touch.

Buffett’s big bet on a falling dollar conflicted with his own advice to avoid following the herd. And, sure enough, that strategy proved costly. Berkshire Hathaway made a $955m loss on its foreign currency positions. Fortunately, investing in foreign (non-US) markets nonetheless paid off.

The effect of the strong dollar was more than offset last year by big rallies in most foreign markets. This year, while Buffet still argues that the huge US foreign account deficit means trouble for the dollar eventually, he’s closed out some of his currency positions and makes the case instead for owning foreign equities. Again, it smacks of the type of conventional wisdom Buffett teaches us to be wary of.

http://www.businessday.co.za/articles/mark...x?ID=BD4A174678

I get the impression some here adhere to the notion that a lower dollar is but a death nil for the US.

I point out another possibility in an old proverb. Which says As one door shuts, yet, another opens. Price competitveness is more often than not the Mecca for exports and price non-compeitiveness is a likely death nil for surplus exporters who have difficulty finding markets that cna afford their currency highr priced products.

For example, China alone, using currency manipulation and thusly price competitiveness, is literally taking export monies that not long ago went to places like Thailand and most of Asia including Korea and even Japan.

Foreign currencies will always go up and down like the wind. Buffetts short term outcome was to lose money on forex. If you look into his forex investment from start to when he decides to finish them, you will surely see a gain. A handsome one too. You are judging on one quarters results which are skewed.

[britmaveric]

Currently back on the upward trend - expect it to rise in 40's in May/June.

[meowchawpnom]

Why are the "G7" and "IMF" (quotes because i cannot get over the gall of these organizations) singling out the US dollar for punishment? If the dollar "must" weaken against the Asian currencies (SAYS WHO? Who are these dictators who are screwing around with our lives and life savings?) WHY then don't "G7" and "IMF" demand that the EURO and GBP and CAD and AUD also "must" weaken? Why just the dollar? Aren't the other farang westerners also living too high on the hog?

Last two days brought all this great news about the US economy U.S. Economy: Durable Goods Orders, Sales of New Homes Surge with increased expectation of interest rate hikes, but the dollar still just stagnates around 1.245 to the euro. Why???

Edited April 26, 2006 by meowchawpnom

[meowchawpnom]

I know Bush wants a weak dollar, for his own nefarious globalization purposes...

What confuses me is this: if the US dollar continues to weaken, won't inflation get out of control in the US, as all those imported goods will surge in price? And if inflation surges, doesn't the Fed have to keep raising interest rates? And doesn't that cause the dollar to strengthen? So doesn't a weak dollar eventually cause a strong dollar?

Now I'm no economist...

[TRIPxCORE]

Why are the "G7" and "IMF" (quotes because i cannot get over the gall of these organizations) singling out the US dollar for punishment?

Last two days brought all this great news about the US economy U.S. Economy: Durable Goods Orders, Sales of New Homes Surge with increased expectation of interest rate hikes, but the dollar still just stagnates around 1.245 to the euro. Why???

They are going after USD because it's true value is far below where it currently stands. It creates global imbalances when one of the major global currencies is unfairly high in value.

[rainman]

if it drops any more i may consider running my aircon on burning US dollars, it may be cheaper than the 2k baht electricity i pay every month!

[usatrader]

Foreign currencies will always go up and down like the wind. Buffetts short term outcome was to lose money on forex. If you look into his forex investment from start to when he decides to finish them, you will surely see a gain. A handsome one too. You are judging on one quarters results which are skewed.

I did not note anywhere in the article or in Birkshires annual reports nor 10K report mentioning the limited time frame of just a quarter you reflect is the case.

Think about it, your saying, the article stated he LOST $950 million in a quarter which I believe is incorrect.

In fact, his entire arbitrage currency play beginning in 2002 of which he has now retreated, cost him $950,000,000 which is not inconsequencial is it.

Luckily he played foreign stocks well and it covered much of his loss in the currency play he now has retreated from.

If I am wrong please show me the evidence that he did not lose this amount in his entire currency play and has not withdraw his currency arbitrage in favor of foregn stocks which, in fact, saved his arse last year in 2005.

BTY, I first bought what is now BRK-A for $8,000 USD per share in 1989 and 13,000 in 1991. It currently is $88,700 per share. I did not option to convert the original shares for 30 shares of class B thank god.

[kdvsn]

BTY, I first bought what is now BRK-A for $8,000 USD per share in 1989 and 13,000 in 1991. It currently is $88,700 per share. I did not option to convert the original shares for 30 shares of class B thank god.

The ratios of the prices of Bershire's A & B shares is still almost exactly 30:1, just as it was at the time that the B shares were first created. For all practical purposes, a "B" share is no different than owning 1/30th of an "A" share. You wouldn't have lost out had you made the conversion to A shares, you would just have gained the option of cashing out your shares in $2900 increments instead of $88,000 increments.

[~G~]

if the US dollar continues to weaken, won't inflation get out of control in the US, as all those imported goods will surge in price? And if inflation surges, doesn't the Fed have to keep raising interest rates? And doesn't that cause the dollar to strengthen? So doesn't a weak dollar eventually cause a strong dollar?

It depends on how high will those interest rates be in relation to other currenices' interest rates. What you describe is moving towards equilibrium.

[Firefan]

I have been one of the few agreeing with TRIPxCORE on this issue all along, and have also put my money accordingly (not completely out of USD though, but overweight other currencies).

Here is my guess; We will see Baht 35/USD before we see Baht 40/USD again.

The Thai Baht has been kept artificially low in order to maintain export competativeness with China. But free market forces are stronger than goverment manipulation as we have seen recently. Part of the weakening COULD have been due to the Taksin telecom sales - and just proves the fact how little (sale of ONE company to foreign entitiy) it takes of real market forces to strengthen the Baht.

Cheers!

[backflip]

It's amazing how accurate private held predictions become, after the fact. Incredible!

[usatrader]

he ratios of the prices of Bershire's A & B shares is still almost exactly 30:1, just as it was at the time that the B shares were first created. For all practical purposes, a "B" share is no different than owning 1/30th of an "A" share. You wouldn't have lost out had you made the conversion to A shares, you would just have gained the option of cashing out your shares in $2900 increments instead of $88,000 increments.

True enough the variant in monetary terms was and is near equal. Yet, at the time of conversion, the real issue at the shareholder meeting was voting rights.

B shares, I am almost positive, carry only 1/200th voting right as compared to an A share. You, if your one of those very rare small share investor, like myself, are essentially 2nd class in the decision process where voting counts if you own the class B.

However, factually, most if not all, issues voted on are never close as it is truly a closed end country club essentially.

Though I seldom go, it, in the blow and go, wheel and deal days of my youth, was still a good place for a small potato like me to hobnob with those that that really influence the economy and politics as I sat outbound and isolated with those few little share holders of my 1st class but overwhemingly low class investment status.

[BrissyBoy]

I have recently been following the US dollar index which is an index made up of 6 different currencies.

It shows that back in 2001/early 2002 that the USD was trading at 120 now it is down to 86 and falling.

Quite scary really. Or a good oportunity to make some money.

USD Index

[TRIPxCORE]

The US currency took a tumble on Thursday after Fed Chairman Ben Bernanke said in congressional testimony that "at some point in the future" a pause in the central bank's two-year campaign of rising interest rates may happen.

He dealt another blow to the dollar by saying that global imbalances, a term interpreted by markets to refer to the gaping US trade deficit and surpluses in Asian countries such as China, may affect the currency.

"I think we are back into a downtrend in the dollar. The rate cycle is coming to an end and trade (deficit) issues are resuming their importance, said Niels Christensen, senior currency strategist at Societe Generale in Paris.

The dollar has remained under pressure since last weekend when finance ministers of the Group of Seven major powers urged China and other Asian countries to let the currencies rise to help mend global imbalances.

The dollar was up slightly against the yen at 114.31 yen, moving away from Thursday's 3-month low of 113.81. But the yen drew support from a barrage of upbeat data that reinforced expectations that the Bank of Japan will raise interest rates as early as July.

Tokyo traders said bids from Japanese investors blocked the dollar's fall, with some buying US Treasuries in the wake of Bernanke's comments.

"It simply doesn't make sense to have the dollar rising if you want to mend global imbalances," said Seiya Nakajima, chief economist at Itochu Corp in Tokyo. "G7 nations seem to be accepting a gradual fall in the dollar."

An end to the Fed's current cycle of hiking rates would remove a pillar of support for the dollar that helped it rally in 2005, especially with both the euro zone and Japan expected to tighten policy this year.

[britmaveric]

I have a suspicion a crash is coming - THB is extremely inflated.

http://www.forecasts.org/bhat.htm

[LaoPo]

I have a suspicion a crash is coming - THB is extremely inflated.

http://www.forecasts.org/bhat.htm

A crash, worldwide, is certainly in the air, although the forecasts from this website are not quite accurate...

Gold for instance is much higher (644,00/Oz) at the moment than here:

http://www.forecasts.org/gold.htm

also Dollar to Euro is not correct, it's over 1,263 now.

http://www.forecasts.org/euro.htm

LaoPo

[britmaveric]

Little off w/gold and Euros, but not significantly.

[Mighty Mouse]

Gold bounced up again last night. With the greenback on the slide, gold will continue to rise in price.

The US Government that is drowning in debts and deficits. The Government's printing presses are running white hot as they pump out more and more worthless dollar notes.

It is their attempt to ward off deflation by increasing inflation.

Bernanke has now indicated that the series of US interest rates rises are over. Greenback holders around the world are starting to offload their holdings. This has resulted in the dollar breaking to new lows.

As long as this action continues, the gold price will keep rising. Where it stops...nobody knows but if you want to take advantage of this predicament start buying gold futures.