Stronger Dollar....

[Olsen]

The US dollar has picked up 10% towards the Euro. That should give Leica room for a rebate on the M8. Has any lower price drizzled through to the sales counters over there...?

 

[akptc]

I haven't noticed any trickle down effect into photo gear yet but my European travel plans are starting to look a bit brighter 🙂

 

[Roger Hicks]

Dear Olsen,

How brave are you?

In other words, how willing are you to bet on the strength of the dollar in 90-180 days?

Personally, I am taking a modest punt (not converting a few thousand dollars to euros, in the belief that the dollar will strengthen further). The rise is, after all, only in the last few days.

Would I bet the company on that? No. The more so as I am not convinced that Leica price rises over the last 2-3 years have fully compensated for the weakness of the dollar. In other words, I think Leica has cushioned US buyers against their plummeting currency. If I were Leica, I'd have my fingers crossed to see some of those losses back on a strengthening dollar.

Cheers,

R.

 

[Solinar]

First the greenback isn't that much stronger and as Roger suggests, will it last? The fundamentals are that the US will need to borrow another trillion dollars from overseas markerts in the coming year.

 

[mervynyan]

no, dollar is not stronger, nor does sterling. only volatility (degree of swings) has increased, but i bet euro is overvalued.

 

[Olsen]

Roger and Solinar,

Well, 10% is 10%. Will the strenghtening of the dollar last? If it does not we will have a major global financial crisis. It has dawned on the strong players in the currency market where they will be if the Dollar crashes. They just might be sitting on the sidewalk with their hat at their feet. So, now 'everybody' are cooperating at holding the value of the dollar up. (Well, we are looking towards Moscow, these days, to see what the buggers in Kremlin are up to...)

Roger,

You just might be right in that Leica have 'hedged' the US consumers for some of the dollar fall. It could well be that they will just pocket the 10% increase of the value of the US exports to cover earlier losses. it could well be...

 

[Roger Hicks]

Dear Olsen,

I did a piece a few weeks ago in AP on exactly this topic, for fans of apocalyptic scenarios. The real apocalypse is redenomination of oil in euros, already threatened by more than one major oil producer.

In the short term (18 months-5 years) you are almost certainly right about what will be, in effect, a 'conspiracy' to talk up the dollar.

During that short term, a LOT of people may take the opportunity to dump dollars.

Sometime in the next few days I'm hoping to have a Bank of France economist over for a drink. He's a monetarist; I'm a Keynsian. Might be an interesting evening.

Cheers,

R.

 

[Keith]

Talk about good timing .... I just bought a lot of gear from Freestyle a few weeks ago when the Aussie dollar was getting ninety seven cents. It's dropped ten cents since then! 😱

Interestingly a lot of economists are now predicting a crash in the housing market here similar to what has stricken the US. For the first time in a long time house prices have fallen ... only a couple of percent but it could be the beginning of a substantail slide!

 

[Olsen]

Roger,

It is not a matter of only 'talking' up the dollar. Large players like Bank of England, the European Central bank, the oil rich states in the Middle East, the Chinese - just everybody, are 'intervening'; buying dollars. The alternative could spell catastrophe. A catastrophe that will hit us all.

You can get out of a stock by 'talking' it up. For for certain states, like China, to talk themselves out of several trillion dollar investments is an impossibility.

Well. All this could be interupted by political instability in some major region. This Georgia-thing has the potential to be such a crisis, but i don't think it will come to that. The guys in Kremlin and the White House are of the same platonic material; 'it's only business', they will say.

 

[Al Patterson]

Dear Olsen,

How brave are you?

In other words, how willing are you to bet on the strength of the dollar in 90-180 days?

Personally, I am taking a modest punt (not converting a few thousand dollars to euros, in the belief that the dollar will strengthen further). The rise is, after all, only in the last few days.

Would I bet the company on that? No. The more so as I am not convinced that Leica price rises over the last 2-3 years have fully compensated for the weakness of the dollar. In other words, I think Leica has cushioned US buyers against their plummeting currency. If I were Leica, I'd have my fingers crossed to see some of those losses back on a strengthening dollar.

Cheers,

R.

If the recent rise of the dollar vs. the euro holds, we might be spared one price increase on Leica products, at best.

I'd be happy if the dollar increased another 10% vs. the euro, but I'm not counting on it.

 

[Roger Hicks]

Roger,

It is not a matter of only 'talking' up the dollar. Large players like Bank of England, the European Central bank, the oil rich states in the Middle East, the Chinese - just everybody, are 'intervening'; buying dollars. The alternative could spell catastrophe. A catastrophe that will hit us all.

You can get out of a stock by 'talking' it up. For for certain states, like China, to talk themselves out of several trillion dollar investments is an impossibility.

Well. All this could be interupted by political instability in some major region. This Georgia-thing has the potential to be such a crisis, but i don't think it will come to that. The guys in Kremlin and the White House are of the same platonic material; 'it's only business', they will say.

Dear Olsen,

All true, but the same piece I referred to above suggested that political instability in China could easily be a major factor: there's a limit to how long you can repress an occupied country (or even your own country) with a mixrure of force and lies.

There's also the possibility of oil redenomination from sheer spite.

When you are dealing with (effective) dictatorships such as Saudi Arabia, Chavez and the Chinese government, economic rationality goes out of the window, and 'talking up' and 'talking down' can have a major destabilizing effect.

The withdrawal of sterling from the ERM illustrates how intervention can fail, even for a (fairly) major currency. Whether it can fail for a reserve currency is, I fully agree, another matter entirely. It is also worth remembering that the dollar has no divine right to be the reserve currency; it could lose its place to the euro, just as sterling ceded to the dollar.

Cheers,

Roger

 

[Roger Hicks]

If the recent rise of the dollar vs. the euro holds, we might be spared one price increase on Leica products, at best.

I'd be happy if the dollar increased another 10% vs. the euro, but I'm not counting on it.

Dear Al,

The first seems the likeliest scenario to me: a longer period of price stability in the USA for Leicas than we have seen since the dollar began its slide 8 years ago.

As for the latter, I again agree completely, and I suspect that this may be what will happen over the next 6-12 weeks. Any bets across a longer time-scale are, in my view, foolish.

Cheers,

R.

 

[retow]

The USD is not stronger, but the Euro weaker, i.e. all is relative. Slow down in economic growth in Euroland and puplic attention waking up to economic realities resulted in the surprising learning that not everything is rosy in Euroland. Nobody has a cristal ball, and those who claim to have one use flawed recipes to read it, wherefore any longer term prognosis on currency trends is tea leaves reading.
For the real long term though, one key fundamental does not look good for Euroland at all, wich is its colossal problem of fastly aging societies.

 

[Solinar]

The USD is not stronger, but the Euro weaker

True, and you know what - I'm really going to miss all the tourists that have been coming through these parts because of the exchange rate. The Brits are the most fun, while the Berliners are lousy tippers, but man they both could shop till they dropped - then afterward order a T-Bone or NY Strip steak in a local restaurant, where the usual local patrons usually settled for a sandwich and an iced tea.

 

[retow]

I'm wondering how European customs' cope with the challenge of its residents coming back from their US shopping pilgrimages, some of whom😉 😉trying to avoid (or should I say evade?) import taxes, ie value added taxes of some 20% or so.

 

[Ben Z]

The US dollar has picked up 10% towards the Euro. That should give Leica room for a rebate on the M8. Has any lower price drizzled through to the sales counters over there...?

Unless I'm mistaken, Leica-USA has a $500 rebate going on the M8 through the end of September. It's been on since before the dollar rallied, so maybe has nothing to do with that, and more to do with trying to clear unsold inventory.

 

[Avotius]

The dollar keeps falling against the yuan, happy days for me.

 

[retow]

The dollar keeps falling against the yuan, happy days for me.

Which proves what I said earlier, all is relative. What is being perceived as USD strengths is rather a weakening Euro. Depending on the asset class used to compare the USD against, it presently is either strenghtening or weakening. In the past few months it was weakening against almost any asset class, maybe except the Yen, but not anymore.

 

[steamer]

What currencies is $ weakening against?

 

[sherm]

Personally,

I'd rather take a long term (90-180) day gamble on the dollar strengthening than Leica being a viable company in the next 18-24 months. They certainly can't afford a rebate now or least for the forseeable future.