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October 26, 2007
Fed up with flawed logic that says foreigners will bail nyc RE out
Repeat after me: a falling dollar makes for attractive US assets only if the dollar STOPS falling.
Once I own the asset, foreigner and American alike a falling dollar makes for a badly performing $ asset that I - as a foreigner - will lose money on (in fx terms) when I come to sell or monetize through rent or whatever.
A steady and sustained decline in the dollar is not good for foreign investors.
Any ideas what the outlook for the $ is over the next few years?? Anyone????
Comments
Remember when the euro was introduced and it immediately started sinking like a rock for no apparent reason. If you bought Euros then, you would have felt foolish. I think it reached rock bottom in 2002 and people kept saying it was oversold. Yet people kept selling the euro for a little while longer. Fast forward 5 years, and it's more than double what the bottom. What people are saying now is that the USD still has some way to fall - maybe 10% but that it's oversold and there's no inherent reason that the US economy is worse than the European economy, blablabla. Also, if you look at the property market in the UK, it's similarly overheated if not even more crazy than NYC. We have a property in London that has appreciated almost 80% in 3 years and that's not counting the currency gains. No fundamental reason that the prices should be so high or that the banks should lend some poor sod that much to buy a house - sound familiar? So what am I saying? Unless you have some personal reason to want a hedge against the US currency falling further (e.g. you are European and will go home at some point), don't bother trying to second-guess. On the other hand, it never hurts to diversify. Buy some foreign stock-market index based funds, sit back and hold. The only people who make money off you when you constantly trade are the brokers.
Posted by: guest4 at October 26, 2007 7:52 PM
I was a somewhat precocious child and started reading the business section in the early 80s. Oil at $30+/barrel and gold around $300+/ounce. For decades, the inflation-adjusted price of oil and gold sank and again, people kept saying it was inexplicable (esp. oil) given the finite amount we have. Anyway, people have short memories and now some are saying that oil will keep going up because of finite supply (same argument as 3 decades ago) and some are saying that oil will come off a bit as the cooling of the American economy puts the brakes on China/India's expansion and also those 2 economies have some fundamental structural problems (corruption, poor gov) that will at some point derail growth a bit. Personally, I am of the latter opinion while still keeping some of my energy-based mutual funds (which I bought in the mid 90s). Just diversify as much as you can and don't buy into some new faddish thing UNLESS you have personal knowledge that it will pan out.
Posted by: guest4 at October 26, 2007 8:00 PM
the outlook for the dollar: gradual down with some lurches faster as one country or other loses a peg or folds and goes with euros as their reserve currency.
short of europe or china getting social unrest there is no good reason to be bullish on dollars. The chinese are figuring out how to setup a restaurant on the moon, good grief, hasn't the penny dropped yet? it is twilight on the american era and the shadows grow longer.
Posted by: guest at October 26, 2007 10:15 PM
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