If you have read this site for a while you know I follow Iceland and New Zealand very closely. I believe both investment destinations have the potential to play larger roles in the world economic order in the coming years.Both countries do have some serious issues with regard to their respective current accounts and a few other things and so many people view both currencies as being in real trouble.
Certainly the naysayers could turn out to be correct and both currencies could get pasted, both have had their moments in the last couple of years, but this chart shows the decline of the US dollar against both the kiwi and the krona.
The reason to bring this up is that both of these are considered a little shaky as I mentioned yet the US dollar is down a lot against both of them. Maybe this speaks to even bigger problems in US or it may not, that is for you to decide for yourself, but the important thing, assuming you don't want to invest in either New Zealand or Iceland, is that these currencies could be sending a signal about US markets.
I generally believe in the concept of message of the markets and I think there is a message in NZD and ISK. To be clear I don't think the message is one of doom but more along the lines of what I have been saying for quite a while; more currency weakness, slightly higher (but still normal) interest rates and below average stock market returns.
Lastly I realize that NZD is quoted the other way but this is the only format I know to make it work on BigCharts, Yahoo Finance can't chart USDISK and Google Finance can't even quote it so this was the only way I know to get them onto one chart.
14 comments:
You do spend a lot of time on these small countries (not knocking the countries). But wouldn't it make more sense to track larger countries where a larger investment could be made? I understand it is your choice, but Australia, Germany, Korea, and Canada among many others seem like a better investment in time.
Personally I like regional or developing country ETFs, but it is your time. Just do not fall in love with a country or an investment
hmm well since i have no exposure to NZ personally or for clients, have no exposure to Iceland for clients and less than 3% personally, I'm thinking that falling in love is not really an issue.
Diversification to me means have exposure to countries with different attributes.
I had posted a comment(sunday) on the relative movement of PPI/CPI.
It is interesting to note that the US Dollar does poorly when PPI outperforms CPI. The Consumer discretionary sector should underperform also.
Today’s report on CPI came at .4% . PPI(all commodities ) was .9%
In the last few years ,the PPI has been accelerating more rapidly than CPI.
The implication is for an overall stock market P/E contraction.
Ex-Fed Chairman Greenspan’s favorite way of measuring relative valuation
between Stocks and Bond is the Earnings-Yield to Bond-Yield ratio.
This ratio oscillates around one.
When should this ratio be above one?
The answer is: in an environment of PPI relative out-performance to CPI.
That is the environment we are in. This is due to the P/E contraction that
results when the PPI/CPI ratio goes up over time.
To see this behavior historically go to:
http://wrahal.blogspot.com/2007/05/earnings-yield-to-bond-yield-vs-cpi-to.html
Speculative issues hammered today. VIX pierced the +2SD Bollinger band yesterday. Breakout thru band will signal the show's over IMHO.
Had to bail on BQI but the GRS recovered nicely; Doubled down yesterday. QID by fri.
This is of topic.I trade using the internet, and I am concerned about my password etc. being hacked.I have tried to find out what my brokers policy is about liability if hacked, and I am getting a run around. My broker is Seibert. Does any one have more information regarding liability if hacked at other brokers or advice regarding this issue. Thanks Ron
Feds are warming up for when they decide to go after the rest of us (again). Gold seized:
http://cryptogon.com/?p=670
Roger, in 1980, in Greeley, Colorado, I happened upon a tree trimmer, working alone, who blindly had lowered himself in his cherry-picker and was calling for help. He couldn't see because of the enormous amount of blood pouring from horrible chainsaw wounds stretching from his lower left chin to his upper right forehead. The device had bucked into his face. I took him to the hospital. A year later his wife invited me to his birthday party.....big Hispanic party that I'll forever remember for the beautiful (many illegal) hard-working people.
Hey Roger, if you have clients on a dealer that gives you the rate differential, the Kiwi is absolutely great to take out for Yen. I know currency speculation is not something one normally includes in portfolios, but if the Kiwi breaks under 5% and the Yen breaks above 1% without a few months advance notice, the world is ending.
-Michael Bommarito
Just thought I would let you know about a new website dedicated to baby boomers called BOOMj.com. There is a nice financial section where you can keep up with all the latest develops in the business world. You guys should check it out.
BOOMj
Roger et al,
I watch the NZD/USD daily and think all Americans should too. It is not the a story of the the surging Kiwi, but rather of the collapsing $USD. Over the recent years one of my steadiest returns has been a cash deposit of USD that I made into a NZ savings account in 2001. For those who comment on the rising cost of oil, gold, lumber, real estate, and other real things, consider for a moment that these things cost more in USDs, not because they are going up, but because the value of USD is collapsing. The USD "ain't" worth a 1970 dime. Your current administration suspended publication of M3 last year because it "did not warrent the expense". US Mint printing presses are busy printing numbers of paper dollar notes that are parabolic, and each is worth less than its predecesor.
If the last statement is true, (and it is) US minnimum wage should be $18.00/hr. Anyone working working for less than $18/hr is working for less than the the buying power of 1970 minnimum wage. Meanwhile most eyes are on "American Idol".
Diff
I'm pretty late to the party having just found this website--but I was wondering at Roger's comment--about being in the Iceland, but not the NZ. Do you mean exposure to the markets there or the currency (or both)?
And why did you choose one over the other? Was it based on the risk or the fact that the Icelandic currency pays a higher yield?
Feel free to point me to any related posts. I'm still going through those with the tags for NZ and Icelandic currency.
I think I found the part about currency vs market! Thanks!
Maria,
I had NZ exposure a while back with NZ Telecom stock personally and for clients. I sold it well but did not buy back when I should have.
Now I personally have exposure to Iceland with an account at Kaupthing Bank that is 50% cash and 50% in the ICEX-15 ETF. No position for clients.
Both countries are very similar and so are both vulnerable to similar things. Owning both might be too big of a bet on extreme deficit/ carry trade beneficiaries.
Thanks Roger. I did find much of that info in your previous posts on Iceland, but it always helps to read the clarification--especially as it sounds like you wanted to pick one rather than two similar investments and keep it small.
Thanks for taking time to answer.
M
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