SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : Value Investing
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Michael Burry who wrote (10094)3/2/2000 3:34:00 PM
From: 16bit  Read Replies (1) of 78666
 
Mike,

Foreign assets are valued in the local currency. If that currency is subsequently devalued relative to the dollar then you have lost money. Currency exchange rates do not have much effect on the price of local products and services in the local currency, except for imported items. Let's say you buy Juan's Repair Shop in Mexico. The purchase price is 1,000 pesos. The exchange rate is 25 pesos to the dollar. Juan's business would cost you $250. If the next day the peso is devalued to 20 pesos to the dollar then you have lost $50 in equity. You still own the business, but the dollar value of future cash flows has become less valuable by 20%. Those 10 pesos a day in profits would now only bring you $2.00 instead of $2.50 you were expecting when you bought the business. If you were to try and sell the business you would only receive 1,000 pesos ($200). The exchange rate would have little to no effect on the price of Juan's Repair Shop. A local purchaser of Juan's would not feel these effects except in that his 10 pesos profit would not buy as much American product. I think the key is to remember that as a US owner you will now receive fewer dollars from that foreign business, with regards to current income and the future sale of the business.

Byron
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News