The Australian dollar needs to fall (30/04/2013)

5 Comments

1. 

   Andrew Legget
   May 7, 2013 at 7:52 am:

   Hi Roger,

   If the rumour is correct than George Soros has decided to help out by shorting it.

2. 

   james.ferntree
   May 1, 2013 at 1:49 pm:

   HI Roger
   I have being following your articles for many years and read your book on several times and 2 questions come to mind that I would like to ask if I may.
   1) When assessing a company there would be times when your valuation of I.V. is incorrect or your assessment of the company is incorrect. How do you identify these situations? What parameters do you measure?
   2) Second question — I have seen many times you do not have a specific dollar value for your I.V. for a company but a range of values. I would appreciate it if you could let your followers know how you do this and how you vary the value of the inputs for your calculations and the parameters you use ??
   I appreciate your time taken to read my email and for your response

   • 

     Roger Montgomery
     May 1, 2013 at 2:15 pm:

     Hi James,

     Some of the information you requested is proprietary so cannot be divulged. The point to make is that IV is an estimate (its not perfectly defined) and as new information comes to hand we adjust the estimate. It is something we do frequently. You can also see valuations change daily on Skaffold. And don’t worry about knowing when the assessment of a company requires adjusting – this you are possibly going to see happening before your eyes!

     Regarding question two, IV is an estimate. We can write down a finite number but it will always represent an estimate and we treat it as such.

3. 

   xiao fang xu
   April 30, 2013 at 8:16 pm:

   THE AUSTRALIAN DOLLAR NEEDS TO FALL

   —IF WE WANT TO BE LIKE ZIMBABWE— YES

   Hi Roger I think you are as good as Mr. Buffett in stock picking and investing but according to this man Doug Casey, this policy that you proposing will hurt majority of Australian people in the long run.
   Of course we all have self interest and if you own gold or silver it is in your interest to devalue australian dollar.

   –Everybody says that devaluing the dollar will stimulate U.S. industry because the products will become cheaper and foreigners will buy them. This is a huge canard everybody repeats and nobody thinks about. Yes, it is true for a while, but IF DEVALUATION WERE THE KEY TO PROSPERITY, ZIMBABWE SHOULD BE THE MOST PROSPEROUS COUNTRY IN THE WORLD as it has already collapsed its currency.

   A strong currency is essential for a strong economy. Sure, a strong currency can hurt exporters for a while. But, a strong currency encourages manufacturers to invest in technology, and become more efficient. It rewards savings and results in the growth of capital that’s critical for prosperity. A strong currency allows businessmen to buy foreign companies and technologies at bargain prices. It results in a high standard of living for the country, and yields social stability as a bonus. The idea that decreasing the value of currency to stimulate exports is a short-lived, stupid and counterproductive solution to the problem.

   People seem to forget that while the German currency was rising about sixfold from its level of 1971, and the Japanese yen about fourfold, those countries became the world’s greatest export economies. It didn’t happen despite a strong currency, but in large measure because of it.

   —Bastiat explained it 200 years ago. They see only the immediate and direct consequences of their actions and pay no attention to – or deny – the delayed and indirect consequences of their actions.
   If the United States, say, devalues its currency by 20%, an immediate effect inside the United States is that everything is 20% cheaper for foreigners. Labor and products are cheaper for foreigners, so exports may increase and make it seem like the economy is getting a great boost.
   But this is typical fallacious economic thinking. There are extremely important delayed and indirect effects that are ignored in such a case.
   Among them is that people don’t want to save a weak currency. If people don’t save, you can’t build capital, and without capital it’s impossible to have investment, and progress is diminished.
   Another ignored consequence is that domestic businesses face increased import costs. Politicians may shrug that off, saying people can buy American cars instead of German or Japanese cars, but many businesses rely on equipment, technologies, and raw materials from abroad. Moreover, all businesses, families, and individuals consume energy, much of which is imported from abroad.
   Further, if the currency is devalued 20%, it means Americans can buy that much less of foreign businesses, and foreigners can buy that much more of US businesses. Frankly, I couldn’t care less what the nationality of buyers and sellers might be. But Americans will be hurt by a weak US dollar as surely as Zimbabweans were hurt by a weak Zim dollar.
   People forget that in 1971, when Nixon devalued the dollar, the Swiss franc was $0.23, and the German mark was $0.25; today they’re $1.08 and $1.31, respectively. The Japanese yen was 300 to the dollar; today it’s about 90. The success of these countries was partly because of strong currencies. A strong currency helped them become rich and prosperous. Of course, most governments are now deeply in debt, and that’s a powerful incentive to destroy their currencies.

   –Currency War
   and the result is that you don’t just get one currency devaluing, but all currencies devaluing against real assets, commodities, goods, and services. I do believe that within the foreseeable future all these paper currencies are going to be devalued to zero – in other words, they will reach their actual intrinsic values.

   This is extremely serious, because the productive people of the world – the ones who actually consume less than they produce and save the difference, which is what all economic growth and progress depends upon – will be wiped out. When their savings vanish, it’s going to create a social and political earthquake right off the Richter scale.

   –Ron Paul
   the loss in purchasing power from currency devaluation in a currency war devastates the middle class, and cancels out any slight benefit that you might be getting temporarily in terms of trade.

   –If history teaches us anything, it is that inflation usually ends in violence.
   The research shows that those countries printing money the fastest are also those experiencing the most social unrest.
   the world’s worst monetary abusers: Syria, Argentina, Egypt, South Africa, Turkey, India, Tunisia…

   • 

     Roger Montgomery
     May 1, 2013 at 8:22 am:

     Perhaps that is why it’s being conducted simultaneously.