The Euro is expected to continue rising against the US Dollar
 

I went to a seminar the other day where a well known economist spoke and he was very confident we will continue to see the euro rising against the US dollar for at least the next year. So, if you can lock in rates on future travel, it's probably a smart idea. As I'm booking travel for a spring trip to Italy I am seeing a lot of "pay now" options. You just need to weigh how far in advance you are going because your money has a time value as well.

As oil goes up, the dollar goes down.
As oil goes up, fuel costs go up.
As oil goes up, our balance of payments goes farther out of balance.
As our balance of payments becomes more negative, the dollar goes down.

As oil goes up, other currencies replace the dollar as being sought after as a hard currency. The British pound and the euro are very strong!!

Now, what caused oil to go up? I cannot blame automatic transmissions entirely, but SUV's don't help. But that is not the real reason. Can anybody say the I word? And it is not India.

Hey you leave Indiana out of this. We aren't the most populous state in the Union and don't drive the most SUV's. :-D

Good one Indy. :)

China's higher consumption has led to more demand and thus higher oil prices. However, oil will not stay at the current high levels for long, in my opinion. Oil prices will begin a gradual decline over time.

As the US economy picks up steam (and high oil price is certainly having an effect), the dollar will get stronger, and the dollar will gain against the €, again just my lowly opinion.

Economists seem to be wrong more than they are right.

--Marv

Sigh. All this blaming SUVs for the world's ills drives me batty.

What about conversion vans? Trucks? Pickup trucks?

What about the millions of people who don't change their oil in their cars regularly, ensure their tires are inflated to the right pressure, and do any of the other minor work associated with getting the best mileage out of their current vehicle?

What about the McMansions being built one after the other (often for only two people) to heat all winter and cool all summer?

What about pleasure water craft?

What about ATVs?

What about massive riding lawnmowers that many don't need?

It's an unfortunate reality that SUVs are an easy target, and probably often true that many drivers could get by with different vehicles, but come on, we live in a capitalist consumer-driven society, and if consumers want SUVs then that's what they're gonna get. That's the way it works, regardless of people's angst/agida over vehicles-slash-status symbols. The gas-guzzling status symbol is nothing new (and many will always feel a desire for them - lust is part of our auto-loving culture, and God knows I'd love to have a '66 Mustang) but now that they're off the ground a bit people started this us-versus-them mentality. And unless people are willing to squawk about all the other energy- and oil-sucking items listed above (and drive hybrid vehicles, too, come to think of it) then knock off the SUV ranting, please.

Sigh. End of MY rant. Back to mocking 2-month-olds in Vegas!! :)

For me, the exchange rate is irrelevant. The $ has been all over the place in my 9 trips to Europe and I have had 9 great trips. And I will be there again in a couple of weeks. Of course, it would be nicer if the $ were stronger, but stay at home until the exchange rate improves? Not a chance.

Not that any of you are incorrect but the primary reason the US dollar is so weak and getting weaker is the growth of the US deficit which cumulatively over the existing administration id probably over 2 trillion dollars.

I'm not reading that anyone made the SUV claim, AH, but sinc you brought it up, it's a pretty good bet that the ones driving them are the same as live in the McMansions, have boats, ATVs, huge lawnmowers, etc.

I've been traveling to europe since 1969 and have heard these warnings many times and they often don't wash, in fact the opposite happens. Interest rates going up in the US vs Europe may be a better harbinger of whether the dollar rises or falls - higher interest rates attract more investment to US, dollar goes up. The low rates for getting euros in the states plus fees may negate any savings you hope to realize and in any case the euro would have to rise significantly to realize any significant savings; better to economize once you're there. I pay no attention to such predictions, which, if the gnomes of Zurich also thought so the euro would already be appreciating. Personally can't see euro going much higher.

If he were a well known and trusted economist, he would have come prepared with slides and charts that show EXACTLY the opposite point to the one he made. Any economist of real value knows full well to reference the theory of "On the Otherhand....."

Well, actually I've heard that the postion of Economist was created to make weathermen look good!

Yeh, doesn't John Kerry's billionaire wife have an SUV? Oh, but he doesn't drive it...

A man wanted to know what 1 plus 1 is, so he consulted a mathematician. The mathematician told him ?1 plus 1 equals 2, of course.?

Not completely satisfied, he next asked an astrophysicist, who responded that it depended upon whether the universe was an open or closed space and that, depending on which you chose, 1 plus 1 really could be either infinity or zero, respectively.

Now completely confused, the poor man finally consulted an economist, who responded: ?What would you like it to be??

quote>>>>

All this blaming SUVs for the world's ills drives me batty.

What about conversion vans? Trucks? Pickup trucks?

What about the millions of people who don't change their oil in their cars regularly, ensure their tires are inflated to the right pressure, and do any of the other minor work associated with getting the best mileage out of their current vehicle?

What about the McMansions being built one after the other (often for only two people) to heat all winter and cool all summer?

What about pleasure water craft?

What about ATVs?

What about massive riding lawnmowers that many don't need?
<<<<<

you don't get it...it's all part of the same american dream lifestyle that is sending us into a heap of trouble.

as for trying to time your bookings according to some projected worth of the dollar, silly pursuit.

PalQ is exactly right, as interest rates go up so will the dollar.

Buy international oil stocks. They have done phenomenonally for me. Try it, you might like it!

Good day to you, Buongiorno,
If the well known economist was so very confident that the euro would be rising against the dollar he would not be giving his secrets out to the public. He would be borrowing every cent he could to place his wager. Actually the euro/dolar rate stalled out many months ago. If anyone knows for certain where it is going from here thay would be the next billionaire.

I'd love to know what this well-known economist was saying about the stock market in the first quarter of 2001.

Buongiorno is absolutely correct.

George Bush's policy of paying for the Iraq war with tax cuts means the Bureau of Engraving will have to print money to pay the bills. That means inflation, folks--and I do mean mega inflation.

Economists know that inflation is coming and that is why the dollar is worth so little right now. The dollar will continue so long as Bush is the president and continues his totally crazy financial policies.

And, the reason oil prices are so high is that we have to pay for oil with devalued dollars.

This may be just my babbling abput something on which I am not very well informed - - but I think that the emergence of China (and other Asia as well, I suppose) as an economic superpower over the next several decades is going to shake up all kinds of conventional economic "wisdom".

Entrepreneurship, open availability to markets, fluid movement of natural resources into and out of China means that it is - - and is poised to be ever increasingly - - an energy consumer like the world has never seen. And given that they can make a profit by bringing in raw goods at x and re-selling finished goods at 3x, then the price of energy will be a minor speed bump - - even if it further doubles or more.

As long as we keep buying the things they keep selling, their standard of living is going to rise, and we are going to have pay more for all those things that we don't make anymore.

I'm sure that this is way too over-simplistic, but I can't help but think that it is partly/mostly accurate.

Best wishes,

Rex

But the point will be, surely, whether future economic super-powers (and don't overlook India) realise that they need to run their own economies in a way that continues to enable customer countries to purchase their products. Being thought to force up the price of basic commodities on the world market can be a real turn-off: which will be awkward if/when oil supplies start to decline absolutely.

Hopscotch,
Just because the guy doesn't have money on his view of the dollar versus the euro, don't assume he doesn't believe it.

Every firm places severe restrictions on the ability of their analysts and economists to invest in positions they recommend. The firms that didn't before the troubles caused by whores like Jack Grubman and Henry Blodget, certainly do now.

It is simply more trouble then it is worth to invest in recommended positions and trading strategies.

Rates on Jan 01.
In 1992 the E was valued at $1.33
1996 1.23
2000 1.01
2004 1.26

What has caused the fall in the value of the Euro? Trade deficits? The price of oil? War in Iraq? High interest rates? Currency speculators?

Ryan

I'd like to continue to believe that but my confidence has been badly shaken by Enron, Worldcom and any number of mutual fund scandals. Not to mention the human tendency of people to overestimate their ability to be objective.

Buongiorno, with respect, calling an economist 'well-known' is not as persuasive as naming the individual in question and perhaps quoting a few references.

Definition of wasteful consumer good/service: one that is not made or used by myself, my company, or my community.

Definition of essential consumer good/service: one that is used by or provided by yours truly or her community. Pay no attention to the fact that the jet that will take me to Europe is one honking big SUV with wings....

I think that FX rates are notoriously difficult to predict. At one point (10 years ago?), the dollar weakened to about 80 Yen to the dollar. Was there a good reason for that?

Out of curiosity, I looked up the 1-year forward exchange rate here:

http://www.bmo.com/economic/regular/fxrates.html

It's roughly equal to the spot rate.

The forward rate can be viewed as today's unbiased estimate of a future exchange rate. It can be computed by purely arbitrage considerations (it depends on today's spot rate and the interest rates of the two currencies in consideration). Since the 1-year forward is about the same as the current spot rate, the two interest rates in question must be roughly the same.

>...the jet that will take me to Europe is one honking big SUV with wings....<

Bravo, 111.

Thanks ira. I've decided that I sound intelligent, but I'm really very stupid because I'm not rich. (And I'm stupid because I believe that smart people must be rich. :-) )

For those who're interested, a Google search turns up this lecture on foreign exchange:

http://www.econ.ucdavis.edu/faculty/...0B/lec2160.pdf

By the way, if the dollar interest rate rises, then assuming that the spot rate stays the same, the expectation is that the dollar will actually *decline* in the future (based on the forward rate calculation). In a way, this sounds like a paradox, but I guess this ignores the possibility that spot rate will rise because dollar denominated assets are more attractive.

In any case, it's not easy. Banks deal with this all the time, and that's why some central bank interventions appear to be effective and some not.

>...I'm stupid because I believe that smart people must be rich....<

Did you mean "rich people must be smart"? :)

Well, ira, I'm stupid, but I'm still smart enough to realize that if A then B and if B then A are not equivalent. On the other hand, if A then B is equivalent to not B then not A.

So I guess the proper negation is if poor, then stupid. :-)

But, no, definitely I don't believe in "rich people must be smart." :-)

Uh, ira, that is my honking big SUV if you please, not 111's.

By the way, how did I decide that I'm stupid? Because I'm poor. :-)

Isn't this fun? :-)

Oops -- I guess I claimed credit for something I didn't say. That does make me stupid.

I just checked my favorite economic site but they were discussing restaurants in Paris with about the same clarity as this discussion of economics.

>..ira, that is my honking big SUV if you please, not 111's.<

My sincerest and most humble apologies, Sue.

LOL, jsmith, I guess we need to get back to what we know best then??? :)

Not to worry, 111, no harm done.

Ah, ira, who can resist your charm? :)

> "Very few, Sue", he said with a wicked leer, while twriling the ends of his waxed mustache.

My view: other countries are catching on to the fact that the U. S. government is bankrupt, relying on its waning ability to borrow from other nations to fill its yawning gap between what it spends and what it raises from domestic sources. Thus, to compensate for this credit risk (either perceived or real), foreign sources demand more.

This current oil price bubble is just that -- our main problem is our political unwillingness to address the tidal wave of unfunded entitlements facing America. The coming explosion in pensions for retiring baby boomers is a case in point. Neither party wants to be the one that punches Santa Claus.