You are right that it's fundamentals that matter in shorting NZ$ against US$.
New Zealand is a farm with a huge mortgage and debts rapidly increasing, at NZ$1bn per month, with swarms of bludgers expecting to be kept in the manner to which they have become accustomed, and breeding like bunnies.
The USA has a huge stock market and vast sales around the world with no end in sight to the gains that are possible and being achieved.
I'm just trying to think of some competitive advantage that NZ has other than [murder, mayhem and economic decline aside] it's a nice place to live, in parts. Fisher and Paykel was an innovative company which was booming 20 years ago. But they are going nowhere fast now. I'm drawing a blank. Xero is quite good [an on-line accounting service]. xero.com There are a few other companies which have done minor things of an international nature which have been partly successful. But nothing that you can hang $1bn a month on.
The USA does have huge problems too, but they have already taken a huge hit on over-priced houses and have cleared a LOT of markets over the last 3 years, with Lehmans, Bear Stearns, and a lot more besides been moved aside. There is a lot more to go, such as the out of control spending by all levels of government with coast to coast entitlement promises which will not be kept. But those promises aren't a problem = just break the promise and tell people to work until they drop and that will be without medical treatment. That would be an economic boost, not a loss [harsh though it would seem to those having to face the problem].
NZ could do the same with welfare = simply tell everyone it's Game Over and it's time to get a job.
When push comes to shove, it's going to be ugly in both instances, but $1 bn per month is $1000 per month per tax payer [in NZ, near enough for government work]. With average incomes of something like $4000 per month, that's quite a hit when people are already bust.
Buying an average NZ house is now more expensive than buying an average USA house. But GDP per capita remains about twice as high in the USA.
Buying hamburgers is a traditional guide to currency valuation and this suggests NZ$ is about right, but take that with a grain of salt: oanda.com
The USA is the HQ of a global economy, like Rome in the Roman Empire, with wealth flooding in from all corners. NZ is like a corner which has gone bad. While the world economic HQ has problems, they are far from terminal, probably.
China is purportedly "the new sovereign" but really, they have over 100 years done nothing other than resurrect the bad old days of a ruling clique passing on inherited power and wealth from bygone dynastic rulers. But now, with communist conquest, they took all the land and property as the personal possession of the rulers. So it's even worse than in the bad old days.
Sure, they can do well, to a certain extent, by having serfs by the billion, but that can only take them a certain distance. Nobody wants to work for masters who confiscate anything they want. Unfortunately, democracy has become like that, especially in regard to opm, and the trend is increasing, so it's not relatively so terrible and could even turn out to be better for most people.
I remain short the NZ$ [meaning holding US$ waiting for an opportunity to move some back to base, in bulk].
Mqurice |
