Forum Archive Index - May 2000

[Chris Darby <darby@ak.planet.gen.nz>]

Mike,
I'm sure Ril spotted this item when The Economist (original source) hit 
the newstand at his nearest tube station last Friday.  In fact it lists 
the NZ$ as being 33% undervalued and the A$ at -38%.  Australian Macbonds 
may be just the call then if we take Ril's advice and bail out of 
equities.  Looking further I notice the Polish Zloty(-49%), Chinese 
Yuan(-52%), Thai Baht(-42%) and Hungarian Forint(-52%).  339 Forints for 
a Big Mac, what a deal!

Clearly, this is a classic Soros style currency manipulation opportunity 
going begging.  Of course the study assumes the US$ to be perfectly 
valued.  That aside, my advice Mike would be to go for Zloty Macbonds.  
I've always thought that the Zloty would soon have it's day in the sun.  
Of course Warzaw is such a grey place in all seasons so few million 
Zlotys( or is that Zloties) domiciled in our more temperate clime(incl. 
Wellington) could have far reaching socioeconomic effects in Polish 
society.

Lastly Mike, keep clear of the Israeli Shekel.  The same Big Mac Index 
has it 43% overvalued.
Best to short those upon news of the next hijacking or breakdown in Golan 
Heights negotiations.

All the best in bond buying,
Chris

    

>Ril,
>
>You would not have had the advantage of reading this mornings Dominion
>obviously. On page 2 they show through the burgernomic survey that the Kiwi
>is 23% undervalued. What do you have to say about that ?
>
>MN
>
>
>At 02:33 AM 03-05-00 +1200, you wrote:
>>After reading today's Herald site.
>>
>>There was a time very recently when a trade deficit (visibles) had never
>>occurred. Now it is running at $3.5 bn for the Feb year. This is an
>>extraordinary figure. March is the time for export resurgance and this
>>was also blown away by a bigger increase in imports.
>>
>>These are significant figures. Comrade Brash will raise interest rates
>>even higher this month to try and hold up the Kiwi ruble and stop the
>>importing of inflation. 
>>
>>Most economists were predicting recently that the Kiwi would reach 53 -
>>55 cents this year. No way.
>>
>>Brash will keep hiking rates and mortgages will hit 10% late this year
>>is my guess.
>>
>>However, the writing is on the wall for the Kiwi and the interest rate
>>rises will choke off equities some more. His theory is also that demand
>>for imports will fall if interest rates rise but this has not been the
>>case so far. In my opinion this will only happen when the dollar falls.
>>
>>At some point Brash is going to have to stop raising or lower rates and
>>the Kiwi ruble will take a pounding. Offshore fund managers should be
>>coming to the same conclusion about now. They will be thinking, hey if
>>the ruble drops 10% I have to make 20% back on the NZ equities to get a
>>decent return to my investors. Knowing that the chances of making such a
>>return in NZ equities or bonds is about the same as a decent ski season
>>on Ruapehu, they will yank their dough out.
>>
>>This will depress the local sharemarket even further IMHO.
>>
>>It is looking really bad for the balance of payments/ current account.
>>It's going to be a shocker this year. Mexico style.
>>
>>What should an intelligent investor do? Aussie or American government
>>bonds. Why? Protection for currency risk and corporate bonds are going
>>to get hit in the stockmarket crash. 
>>
>>Also, with all these big companies doing a runner to Sydney there will
>>be more shareholders there in time and a higher dividend stream heading
>>over the Tas (or remaining over the Tas).
>>
>>Like to offer some good news but can't except every time the ruble falls
>>I get a payrise.
>>
>>---------------------------------------------------------------------------

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