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Strategies & Market Trends : Australian Shares and ADRs
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To: Moominoid who wrote ()6/30/1998 5:29:00 PM
From: Carey Thompson  Read Replies (2) of 96
 
Take a look at the June 29, 1998 issue of BARRON'S. There is an article professing a direct relationship between the Australian Dollar A$ and the price of commodities. Basically, it states when the commodity prices decrease; the A$ decreases relative the the US dollar. A graph on page MW12 shows how the both commodity prices and the A$ have decreased over the last 2 years. Also, the author quotes some bank economist that states "the A$ provides a natural equilibrating mechanism" to lower world commodities prices which mostly are measured in US$. My questions are: "Is this a temporary relationship or does it hold over years?" "When commodity prices are increasing does the A$ increase relative to the US$?" I dunno.

If I give this theory the benefit of the doubt, there may be an approaching time to patiently invest in profitable, growing, Australian stocks and hold them a couple of years. Then you can get a double whammy working in your favor.

Follow me here. When commodity prices stabilize, the A$ will stabilize relative to the US$. Look for firm prices in Australian exports i.e. wool, timber, etc. At this time buy your profitable growing Australian exporters and wait for 1) their earnings to grow AND 2) the A$ to gain in value relative to the US$. When will this happen? I dunno, but I will monitor this thread for clues.
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