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.

Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Henry Volquardsen who wrote (562)	9/3/1998 2:25:00 PM
From: Sam	Read Replies (1) \| Respond to of 3536

A probably dumb question about how the trade deficit is computed: If I buy (in the USA) a Seagate drive made in Singapore, is that considered an import? Does it count against the trade deficit? Does the profit (if there is any, which there may not be these days for SEG) that is repatriated count somehow in the deficit? If I buy a Toyota made in CA, does that count against the trade deficit? Does whatever profit Toyota gets count as an export? How is this stuff measured anyway?

To: Henry Volquardsen who wrote (562)	9/3/1998 2:31:00 PM
From: Robert Douglas	Read Replies (1) \| Respond to of 3536

Henry, I hate to argue an "obscure" point but.. This is a technical point so I am not trying to be dense, just making an obscure BoP point. The investor that finances the trade deficit is automatic. When a foreigner sells us goods he effectively accepts the dollar as payment and he becomes the investor. I'm sure you're well aware that this foreign seller holds on to those dollars for about two seconds. If the seller is a manufacturer he has people to pay and suppliers to pay. Most of these bills are in his local currency and so he dumps these dollars on the foreign exchange market. In no sense of the word does he become an "investor". Someone has to hold those dollars and they do not get stuffed in mattresses. If there are not attractive investments to hold in dollar terms, at the present level of the dollar, then the dollar drops. That is what markets do. Your description would be the equivalent of me saying that massive stock options do not dilute the value of a company's stock because the employee that took them became an "automatic investor". You also wrote: Also one other point. You reference a fellow with a job title of "manage of client advisory services". I'm sure he is a very bright fellow but I've had jobs such as that early in my career. I know exactly what the job is and the gut is essentialy a salesman. His job is to try and make up a story about the market and convince clients to do a trade. These guys are notoriously short term oriented. Think of your stock broker. I would as soon take a bank's client advisory services opinion about foreign exchange as I would take a stock broker's advice about equities. Fair enough, but under those qualifications most people quoted in the Wall Street Journal could be dismissed summarily. Hey! Not a bad idea. <G> But instead of attacking this person, I think we should address the idea, which happens to be one I agree with. Simply put currency movements feed on themselves. Most foreign holders of dollar denominated assets have recently been rewarded double by holding an appreciating asset while the underlying currency rose. This has been a strong magnet to attract foreign money. Now that this assumption (a rising dollar) has been questioned, it may in-and-of-itself subtract from future investment. If this "salesman" has noticed this among his clients, then I consider it important information. -Robert