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What to do about falling dollar?
Old 07-24-2007, 04:05 PM   #1
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What to do about falling dollar?

I keep reading about the plummeting of the US dollar. I'm wondering what the impact on investments is in the US. The market has been on a tear, is this because it is cheaper to invest in USD securities based on the cheap dollar for people outside the US? Does this figure into PE and PB ratios?

Should the contrarian in me see this as a fire sale and load up on US securities or US bonds waiting for the rebound of the dollar or is that all figured into the prices?

Just wondering what it means to me, and if it is a blip that I could use to my advantage.

Thanks!
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Old 07-24-2007, 05:33 PM   #2
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The way I hear it, the Bush administration
favors a low dollar to help the trade deficit.



The falling dollar is hurting OPEC.


Falling dollar puts pressure on Opec

By Javier Blas in London
Published: July 23 2007




The falling US dollar is lowering the Organisation of the Petroleum Exporting Countries’ purchasing power by up to a third, making the powerful oil cartel more reluctant to increase production and cut prices.

Although oil is trading near last August’s record $78.65 a barrel, Opec calculations show that, when adjusted for the weaker dollar and inflation, an average of the 12 Opec members’ crude oil prices has fallen in the past year.

FT.com / World - Falling dollar puts pressure on Opec
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Old 07-24-2007, 06:53 PM   #3
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Helena, think OPEC will ever reprice on the Euro?

Olav, I would venture that the prudent thing to do would be to make sure that you own a sufficient percentage of international equities to smooth out any hiccups on the way. If you think in terms of balancing risk, what would you do?

If you factor in US-based companies that already have a significant multi-national exposure, does that change your risk exposure?
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Old 07-24-2007, 07:06 PM   #4
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I don't know about the falling dollar, but the falling stock market sucked today. Hopefully just a healthy hiccup.
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Old 07-24-2007, 07:09 PM   #5
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Quote:
Originally Posted by Webzter View Post
Helena, think OPEC will ever reprice on the Euro?
Isn't that what Saddam Hussein tried to do


The Euro is only going up because the dollar is going down.

Beware of fiat money without a country.
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Old 07-24-2007, 08:08 PM   #6
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Quote:
Originally Posted by Dawg52 View Post
I don't know about the falling dollar, but the falling stock market sucked today. Hopefully just a healthy hiccup.
Hopefully so. February didn't turn out to be so bad.

Maybe it's just got to hiccup before the Dow passes 14,000 solidly.

As for the falling dollar, that's not nice but I will only continue to try to cover all angles through diversification and over-planning for ER (with safety margins).
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Old 07-24-2007, 11:27 PM   #7
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Quote:
Originally Posted by Webzter View Post
If you factor in US-based companies that already have a significant multi-national exposure, does that change your risk exposure?
I have been using my substantial portion of USD to buy US multi-nationals hoping to leverage up on earnings gains from foreign operations. Am hoping this helps to alleviate the pain of the depreciating USD for this Canuck (about 50% depreciation compared to CAD since ~2000). I am definitely not buying foreign companies with USD because of the risk of a significant turnaround in the USD's value relative to other currencies in the future.

From a Canadian's perspective, US indices have gone nowhere since 2001/2002 lows.
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Old 07-24-2007, 11:59 PM   #8
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Falling dollar won't hurt you until you measure what your dollar based investment have done vs the rest of the world.

Here is Harvard endowment's investment mix as of 2004:

15% US equities
13% Commodities (about 3/4 of this part is in timber)
13% Private Equity
12% Hedge Funds
11% US Bonds
10% Foreign Equities
10% Real Estate
6% Inflation Index Bonds
5% Emerging Markets
5% High Yields
5% Foreign Bonds
-5% Borrowed Money

Harvard's investment team are as sharp as they come and their results prove it.
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