Silicon Investor (SI) -- The First Internet Community

STOCKTALK

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.

Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: JimisJim who wrote (186877)	12/4/2014 1:02:36 AM
From: Elroy Jetson	2 Recommendations Recommended By JimisJim Land Shark Read Replies (1) \| Respond to of 206326

Jim - You emailed me the link for the Federal Reserve of St Louis, which really is the best source. Thanks. Using that website, here's two charts. The first chart shows the trade weighted value of the U.S. Dollar over the past 20 years. The second chart below, shows the same Dollar data compared with the price of oil (WTI and Brent) over the past 20 years. A.) You can clearly see the price of WTI fall below Brent since 2011, as extremely low natural gas prices create domestic competition for oil in the United States. B.) Oil price tends to fall during recessions, the shaded areas on the chart. No surprise. And the 2008 recession/depression was whopper compared with 2002. C.) If someone sees correlation between the value of the U.S. Dollar and the price of oil, they'll have to explain what they're seeing, because I just don't see it. *There should not* be a correlation between the Dollar value and oil price because oil is a very small part of U.S. GDP, either imports or exports. D.)** The U.S. Dollar was arguably somewhat over-valued in 2000 at the height of the tech stock bubble, as foreign investors bought Dollars to invest in U.S. tech stocks. The 9/11 attack followed by big government spending on wars certainly helped send the U.S. Dollar back down. But is the U.S. Dollar currently over-priced? Absolutely not. The U.S. Dollar is under-priced. Webpage Link -- research.stlouisfed.org The Dollar line looks flattened-out only because the scale on the left has been enlarged.

To: JimisJim who wrote (186877)	12/4/2014 2:24:55 AM
From: Elroy Jetson	Read Replies (1) \| Respond to of 206326

What is the "Trade Weighted Dollar Index" and why use it? The "Dollar Index" compares the value of the U.S. Dollar with only 6 currencies reflecting the percentage of U.S. trade with each country in 1973. This was before oil rose in price and trade with countries like Saudi Arabia became important, and before the creation of the Euro. Being simple, the "Dollar Index" is very easy to understand but does not provide an accurate view of Dollar valuation today, or even in 1973. en.wikipedia.org investopedia.com The "Trade Weighted Dollar Index" compares the value of the U.S. Dollar with 26 currencies, which account for 90% of U.S. imports and exports. The weight of each currency changes slowly to a small degree depending on the volume of U.S. trade with that country. en.wikipedia.org investopedia.com investopedia.com (Although the Euro did no become a currency until January 1999, the Fed used a basket of these currencies to extend the data in this series back four additional years to January 1995) Here's the type of distortion the Trade Weighted Dollar Index eliminates. Since 1985, China's trade with the world has greatly expanded (see U.S. imports and exports with China in the second chart below). Over this period of time China has bought an increasing amount of raw materials from Brazil, Australia and New Zealand which greatly inflated the value of these particular currencies. Very recently China has bought tremendously fewer raw materials from these nations, so their currencies have tumbled. These countries account for a very small percentage of U.S. trade, so these wild swings in value don't affect the "Trade Weighted Dollar Index" much at all. On the other hand, these currencies were not even included in the "Dollar Index". So the newer "Trade Weighted Dollar Index" is still better. When I was in Australia in 1997 the Australian Dollar cost $0.49 and both real estate and living prices seemed like they offered at sale prices. Seeing a bargain, I opened bank accounts and moved money to Australia. By July 2011 the Australian Dollar was no bargain at $1.10 and travel in Australia was pretty expensive. By September it had fallen a bit and I wired all my money back home. (see chart below) Being in Europe for a couple of months 14 months ago, I can assure you the Euro is still very overvalued against the U.S. Dollar. An investment tip: Any exchange gain on a foreign currency, not held by a business, is not taxable. Of course any interest earned is taxable in the U.S. with special tax forms and filings - but it was well worth my trouble. Australian Dollar research.stlouisfed.org Trade with China research.stlouisfed.org

To: JimisJim who wrote (186877)	12/4/2014 2:48:28 AM
From: Elroy Jetson	Read Replies (1) \| Respond to of 206326

On reading the last post there's a chronology problem regarding myself and the Australian Dollar. When I was in Australia in 1997 the AUD was somewhere around $0.64 or so, but prices still seemed quite a bargain so I opened a bank account there - ultimately hoping to buy real estate, but that proved to be a problem if you don't have a residency permit to live there. When the Australian Dollar tumbled again to $0.49 or so, where it had been years earlier, that's when I wired a bunch of money to my accounts in Australia, in spite of not being able to use it to buy real estate. I moved some back to U.S. Dollars in 2007 when the AUD hit $0.90 which was too bad as the currency ultimately rose higher, but more importantly, interest rates there remained high while bank interest rates in America and most of the rest of the world tanked after 2008. Declining interest rates and a decline from AUD $1.10 prompted me to move the balance back to U.S. Dollars. Is there another currency I'd rather hold currently than U.S. Dollars? No. If you're there in person valuing a currency is in many ways a lot easier than valuing a stock.