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Thread: BMW's profits etc...

  1. #1

    BMW's profits etc...

    This is more than a discussion on car profits, it is bit of a storm warning for those of you not inclined to follow the machinations of the economy.

    This is an excerpt from Bloomberg

    Munich-based Bayerische Motoren Werke AG, the world's biggest manufacturer of luxury cars, and Paris-based Hermes SCA, the maker of Kelly and Birkin handbags, blamed the currency market for disappointing profits.

    European Central Bank President Jean-Claude Trichet said Nov. 8 that the decline in the dollar has been "brutal,'' while Canadian Finance Minister Jim Flaherty said he's "concerned'' by the surge in his currency. French President Nicolas Sarkozy told a joint session of the U.S. Congress on Nov. 7 that the Bush administration must stem the dollar's plunge or risk a trade war.
    I would also like to draw everyones attention to these very well informed blogs...

    They all make very compelling reading, and I hope by alerting them to those of you whose business isn't finance, they'll help you understand exactly what is coming.

    Here Kenneth Galbraith recounts a series of unfortunate events in the history of the NYSE

    The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few as possible escaped the common misfortune. The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that, there would be still another. In the end, all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains...The bargains then suffered a ruinous fall. Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks, would see their value drop to a third or a fourth of the purchase price in the next twenty-four months. The Coolidge bull market was a remarkable phenomenon. The ruthlessness of its liquidation was, in its own way, equally remarkable...

    Protect yourself as best you can, stay in cash, stay on the sidelines, and don't be too eager to rush back in.
    Andrew Macpherson

    Expert Z8 Inspections, with full support for both Z8 sale and purchases.

  2. #2
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    Oct 2006
    For our amarican friends, yes stay in cash. But not in dollars, buy euro's.

  3. #3
    I'd beware buying Euros because although we'll likely see $1.50 to the EU soon, I think most of the dollar's slide is done. As the UK & DE bank exposure to the crisis becomes clear there is a bigger chance that the dollar will rebound over the next 24 months than continue it's slide. Buying a basket of currencies might be a better idea, especially Saudi Riyals if they uncouple from the dollar as they continue to say they will. There is also a case for buying the Chinese Yuan, because it makes little sense for them short sell the 400 billion of US debt they have in US Govt bonds that they've been threatening to do, if they leave their currency pegged to the dollar. Our other top two creditors are Japan, which holds over 600 billion of our nation debt, and the UK at around 200 billion.
    Andrew Macpherson

    Expert Z8 Inspections, with full support for both Z8 sale and purchases.

  4. #4
    Administrator thegunguy's Avatar
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    Sep 2005
    It's pretty hard on a company when your largest market's currency takes such a significant dip. It's even worse for UK manufacturers. Competitive pressures in the market limit a brand's ability to adjust for the currency spread through price increases. I'm guessing we'll begin to see the foreign (to the US) manufacturers cut costs in both product and processes.

  5. #5
    The weather forecast continues to look rather dire. I've lived through two hurricanes, and survived because we did everything required to keep the weather at bay. I view all this in a similar manner, being aware and being prepared is all we can do, so on that note here are a couple more links that I feel make for very compelling reading.

    Nouriel Rubini's piece on the rising risk of a total financial meltdown, and this piece about bank debt and write offs in yesterday's FT.
    Andrew Macpherson

    Expert Z8 Inspections, with full support for both Z8 sale and purchases.