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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: A Horse With No Name who wrote (90697)	11/22/2008 8:16:14 PM
From: The Vet	Read Replies (1) \| Respond to of 116555

Cash may be king, but which country's cash is superior becomes the real question. While the US dollar maintains its position in the world financial pecking order, US domiciled holders seem to ignore its future direction and the possible effects of change in its relative value will ultimately have on them. The commodity currencies like the Canadian and Australian dollar have been savaged in a matter of a few weeks when compared to the US dollar but in terms of gold they have been relatively stable. This has resulted in a rather curious distortion in their stock market values where locally domiciled miners of gold have been decimated in line with US miners. The market seems to have simply transferred the drops in equivalent US domiciled companies to the offshore companies despite the fact that in Australia in particular their costs are denominated in local currency and the value of their production in local currency is stable or improving. This result is more obvious in gold miners, but even iron ore, coal and base metal miners have been overly affected. The huge drop in the AUD (to a low of around 60 cents US from a top of 96 cents a short time ago) has cut local costs and compensated somewhat for the low product prices (in USD). Some miners have borrowed in USD and they have a problem but others are in better shape than they have ever been as world wide supply drops, local labour costs drop, oil prices drop and their product is little affected when priced in the local currency. These huge moves in forex worldwide breeds uncertainty and that always depresses activity and confidence, but once it settles there will be winners and losers, and I predict that commodity producers in the countries with the lowest value currencies will be amongst the winners.