Posted on 11/27/2004 10:24:13 AM PST by soccer_linux_mozilla
The United States’ trade deficit is soaring and the once high-flying dollar has sunk to record lows against Europe’s common currency.
The dollar’s record low against the euro coincided with the government’s report that the United States was running a trade deficit through September at annual rate of 592 billion dollars. That compares with last year’s record 496 dollars billion. As a result, the country is having to borrow almost 600 billion dollars from overseas this year to pay for the imported cars, televisions and other items Americans are buying.
SmartMoney 12/2004 had an article suggesting these ADRs:
AAUK (Anglo American)
BBV (banco Bilbao)
NSRGY (Nestle)
PBR (Petrobras)
PHG (Philips Electronics)
SKM (SK Telecom)
These have PEs averaging about 12, and LT growth averaging about the 12%.
Repost of mine form the other day..
"Im going to throw another item into this mix.
Remember the names FLEXTRONICS, and Michael Marks.
Hopefully, Ill post some info on this down the road, when time permits.
Flextronics is an EMS (Electronic Manufacturing Service ) company. Basically, if you are an engineer / businessman, and you have a design and want to put it into mass production at a rock bottom price, you deal with folks like Flextronics. They, employ (proudly I may add) young engineers worldwide, but manufacture in China. (They are an Asian company). Marks (American, Harvard MBA) goal is to vertically integrate Flextronics, by moving also into engineering design, and even component manufacturing. They hope to be the dominant company doing all of this in ten years.
When this is done, virtually all products for the worldwide consumer market (including of course, the USA) will be entirely designed in China and /or India / Eastern Europe, and manufacturied in China, using Chinese semiconductor chips. China is already pushing to adopt its OWN standards for multimedia and cellular, thus making their systems incompatible with present US and Euro systems.
In the worse case, most US OEM engineering and semiconductor companies who do not lead in innovative niche markets will be OUT OF BUSINESS.
Engineering in the US will be largely confined to military and some industrial, boutique or niche markets.
This is their goal. Whether they realize it is a function of US, and the US government."
Somehow, looking back earlier than the last 30 years seems like a lot of work for a Saturday, but if you google the fed, St. Louis maybe you can find something. I do have a chart that shows the dow with the consumer price index going back to 1789, but once again it's hard to relate all that to the present day.
ITOH, since 1973 the average index has slopped around between 78 and 131 and has averaged 96. That's one reason why I don't find having it drop to 90 in October so 'scary'. The other reason is that it doesn't matter. Unemployment matters. Every single time unemployment goes over 15 percent there are a lot of unhappy people; but you tell me just what was so 'scary' about having the exchange value of the dollar at 78 for four months in 1995. I thought 1995 was supposed to be some kind of economic miracle.
I'm not anxious to see our dollar at $0.25
>>Notice however, that China's currency hasn't risen.<<
The reason for the Yuan not rising is China has it locked in place. There has beed talk the past few months about letting it float.
>>China, for instance, is hoarding $500 Billion in U.S. Dollars. India has another $88 Billion. Japan has even more. Europe, more Dollars still.<<
These are the main buyers of the Treaury auctions. Holding the US the debt keeps us alive and their economy moving upwards. Beneficial to both of us.
>> That extra value of the Dollar enables Americans to purchase more foreign goods than a free market would normally allow.<<
That atificially promoted value of the Dollar enables Americans to purchase more foreign goods than a free market would normally allow.
You can't see it at that level. A U.S. Dollar is *forever* locked in at $1.00 for Americans, never $0.25.
It's only to *foreigners* that the Dollar's value fluctuates, and even then it only fluctuates for remuneration back to your foreign nation...your intra-U.S. trade still gets full value.
High U.S. consumer purchasing power is key to the continued success of manufacturing economies like China. Our economies are symbiotic; we cannot lose purchasing power without adversely affecting China et al.
Dear Child, there has been more than talk; this whole Dollar drop is designed to break that Yuan-Dollar peg.
It is by propping up the U.S. Dollar with that currency peg that the Chinese are able to subsidize their exports to the U.S.
We'll kill that currency peg by dropping the Dollar back to its fair market value, and with that change the U.S. economy will further boom upwards.
I voted for Bush, and have a lot of faith in his business sense (among other things), I'm sure he's aware of the trade deficit and what I'm not sure of is how his team is rationalising the existence of these deficits and the level of national debt.
I'm sure you can't just draw a parallel between personal debt (not maxed out credit cards), but debts that are allowing one to built up a business or build a building that will end up bringing a profit to all involved.... between that 'investment' debt, and debt on the level of an entire nation. I just feel it because most of are funds are linked to the dollar and whereas 3 years ago we got over a euro for a dollar, now we PAY $1.35 for one euro.
Like I said, the conventional wisdom was that the dollar would shoot up post a Bush victory, but it's just sunk further.
In a truly free market, the correct valuation of your currency is achieved when your imports and exports precisely balance.
If you have a trade deficit or surplus, then your currency is not at its fair market value.
What can one do, now, to position oneself to benefit from a floating Yuan? Any instrument considered. Hopefully, there is something that could be entered before the float happens.
Why do Snow & Bush say they are, and from what you say, actually follow a "high-dollar policy"? No matter their intent, it seems to do no good, does it? The $ just keeps falling, making them look helpless. Am I missing something?
A Dollar crash does *not*, repeat, NOT bring about huge trade deficits. The loss of high-paying jobs does not bring about a crash, either.
In fact, a crash in your currency kills your trade deficit. So the GOP will *NEVER* be "blamed" for a huge trade deficit after a currency crash...because there won't be any trade deficit.
...And that's a good thing.
Yes, you are missing what is going *unsaid*. Bush does favor a strong Dollar, but what is unsaid is that we are far from the Dollar being just "strong," we are at a point where the Dollar is grossly overvalued (still).
A strong Dollar is vastly below current Dollar levels.
It's an easy test to see fair market value for a currency such as the Dollar: when imports = exports, then your currency is at fair market value. A strong Dollar will have slightly more imports than exports. A weak Dollar will have slightly more exports than imports.
Right now, we still have vastly more imports than exports, so the Dollar has a long way to fall before imports are only slightly more than exports (i.e. the Strong Dollar point).
'If a strong currency is so wonderful then why are the Europeons whing so loudly about their Euro?'
I live in France, and lived here over the change from the French franc to the Euro. Everyone noticed a devaluation immediately following the change. The 10f paper became 2 euros. 2 x 6.55957 = 13.12.
This ratio showed up everywhere, like a 25-30% overnight inflation! People were really confused (so many older frenchies would just had a fistfull of coins to the cashier and tell them to pick out the right money!)
Paychecks didn't rise but prices did. There was some big rip-off somewhere! I do not understand the first thing concerning this change over, I don't know the why, the why not, or who it benefitted. I can say though that purchasing power noticably changed for the worse.
And not to be a real conspiracy theorist, that lost value went SOMEWHERE!
Buy assets such as oil and real estate (surely you don't think that our real estate boom has been for no reason?!).
Borrow money at *fixed* rates with contracts that aren't callable by your lender, invest those loans into assets.
Do not hold cash. Cash is for trading, not for storing your wealth.
It is outrageously expensive for an American living in France to pay the basics!
It is so odd, like to fly, I buy the ticket from America (and leave before I come...) and save 30%!
Something's fishy. The cost of living is outrageous! Where did the dollar's value go?
Thank you. Here is something I found on ishares.com.
iShares® Launches the First Pure Mainland China Exchange Traded Fund for U.S. Investors
SAN FRANCISCO, October 08, 2004—Barclays Global Investors announced today the iShares FTSE/Xinhua China 25 Index Fund (ticker: FXI) began trading on the New York Stock Exchange. The fund is the first pure mainland China exchange traded fund (ETF) for U.S. investors.
>>You can't see it at that level. A U.S. Dollar is *forever* locked in at $1.00 for Americans, never $0.25.<<
Ok Let me say the full sentence, just for you.
I'm not anxious to see our Dollars value drop further and be worth $0.25 when we want to use it in a foreign country.
A very good example is the Canadian Dollar is viewed as only being worth $0.75 in America. It is still a dollar but it will not buy $1.00 worth of American items.
Do you understand that or should I draw you a picure?
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