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Weak dollar good/bad for ER plans
Old 05-13-2009, 04:21 AM   #1
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Weak dollar good/bad for ER plans

Anyone's ER plans affected by / dependent on the US dollar strengthening?

Or if you prefer, the dollar holding and the Euro weakening.or falling faster than an already longtime ailing dollar.

Specifically what are people's views for the outlook, of the EUR-USD for say:1-month, 3-months, 6-months down the road?

Seems the general consensus is the swelling US deficit, low interest rates, and Europe showing signs of improvement without quantitative easing, means bearish times for the dollar ahead, circa: $1.40-$1.47+.

Yet there are boatloads of Dollar bullish analysts at the big banks kicking out investor reports forcasting EUR-USD back to $1.30 by June, $1.20 by September!!!? Some technicians are even forecasting near-term future EUR-USD parity!

--What are they basing this on? What do they know but aren't saying?-- any thoughts?
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Old 05-13-2009, 07:25 AM   #2
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"Specifically what are people's views for the outlook, of the EUR-USD for say:1-month, 3-months, 6-months down the road?"
I cant say anything about that short term, but over a year clearly EUR will out perform dollar. Trichet = genius. Bernanke = idiot.

I think because our deflation is still worse than Europe's in the short term. That wont last long though. More dollars are needed domestically in deflation so the demand is higher = appreciating currency. How long that will last is anybodies guess.
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Old 05-13-2009, 08:24 AM   #3
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I am hoping for a dollar getting least towards the Pound. Just personal greed. I should be retiring in a couple of years from living in the UK. Bought a house a couple years ago (met + married a local lass)....hopefully will at least break even in two more years on selling the house. If the Pound will go up to at least $1.70 (bought at about $1.92)again that should do it. My wife also has about 60k in Pounds so at least for us, the Pound gaining strength is something I hope will happen. We bought a house in WA last summer and were paying for it with some of my wife's old house the time we got back to the UK to wire the money back we lost about $15,000 as the dollar was starting to weaken.... aaaarrrrrrg.
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Old 05-13-2009, 08:32 AM   #4
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Suppose your ER is projected to last 40 to 50 yrs AND you plan the perpetual tourist lifestyle.

Your portfolio stragety then becomes what?

Think Terhorst's or Billy and Aikasha.

heh heh heh -
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Old 05-13-2009, 09:13 AM   #5
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I haven't exactly been keeping up on all the Bank of England news, but if things haven't gotten much better since the last I checked than the outlook isn't to pretty. Based on how stupid the UK government has been with its money, the Bank of England may be forced into the unthinkable, monetizing their treasuries. That will destroy the Pound pretty quickly. This of course could be prevented if the Tories came to power and drastically cut spending.

I would personally bet on Trichet at the ECB more than the US or the UK.
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Old 05-13-2009, 10:09 AM   #6
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I'm trying to work out what currencies are currently losing/gaining.

Last year we moved a large chunk of cash from the USD to Aussie $ after it tanked from 98 cents to 63 cents. The Aussie is now back to 76 cents against the US$ so from that you would have to assume the Aust. economy is performing better than the US. Housing does not appear to be hit as bad in Aust as it has been elsewhere.

We also hold a position in UK pounds which has declined from 1 pound = 2.5 Aust dollars to 1 pound = $2.00. I hadn't realised the pound was suffering so bad but it makes sense that the housing is showing such dramatic falls with no signal things are getting better.

Then when I look at the USD/GBP calculation is looks a if the pound is weakening and the dollar getting stronger. However, based on what is happening to the Aussie dollar/USD I would assume that the performance of the USD against the pound is just a case of the lesser of two evils.

We are thinking if the Aussie $ keeps coming back we will transfer our dollars back to USD and wait for the next crash of the Aussie.

I be a girl, he's a boy. Think I maybe FIRED since July 08. Mid 40s, no kidlets. Actually am totally clueless as to what is going on with DH.
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Old 05-13-2009, 10:26 AM   #7
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A weak dollar could potentially hurt our ER plans. We are considering the possibility of retiring in Europe (either on a full time or part time basis) but we still have a number of concerns including the outlook for the USD. I think that we will have to be flexible to make it work. There are so many other parameters to consider when manking such decision (taxes, healthcare, practicality, etc...) and the political situation is so fluid right now on both sides of the ponds (lots of tax and healthcare reforms) that we will have to keep evaluating the situation until we are ready to pull the plug.
46 years old, single, no kids. Exited the job market in 2010 (age 36). Have lived solely off my investments since 2015 (age 41). No pensions.
Current AA: real estate 64% / equities 10% / fixed income 16% / cash 10%
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Old 05-14-2009, 09:38 AM   #8
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I have no idea if the $ will weaken in the future or not, but here are some things that seem obvious to me .. please correct me if I'm wrong

- Imports become more expensive: Since we currently have a declining manufacturing base, this means that a lot of what we buy will be more expensive. On the other hand, as the $ weakens, our exports should be more attractively priced and local manufacturing could rise.. but it will take time.

- A lot of the domestic companies we own (large cap) get close to half their revenues abroad. Those revenues/profits will see an increase when converted to a $, so stock prices should benefit. A similar story for international stock - as the price increases abroad, the $ valuation will rise even more.

- I've heard that interest rates will rise here as the $ falls in value. That will be bad for the economy and for domestic stocks (at least partially based on domestic businesses suffering). It translates into higher interest/dividend rates which could be good as long as you're not long on nominal bonds.

- Traveling abroad becomes more expensive, but there are plenty of places in the world that have a lower cost of living than we do - at least today.

There are other aspects that are interesting to me, but I don't have a feel for how a lowered $ will impact them. My biggest consideration continues to be the cost of healthcare and tax rates, and I have no idea how a declining $ will affect them.
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