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Current Topic: Business

Yahoo! News - Dollar Hits New Low, Gold at 16-Yr High
Topic: Business 3:12 am EST, Nov  8, 2004

] The dollar index, a measure of the dollar against a
] basket of currencies, extended a slide to a nine-year
] low.

This is going to require a little explanation as to why this is important. A large portion of the US economy is dependant on imports. We'll start with cars. Currently the #1 domestic car manufacturer is GM followed by Ford and Toyota (yes, that's right, Toyota). The trick here is, no one makes a car anymore with all domestic parts. Toyota obviously makes a good number of their parts in Japan where they are brought over and installed in US cars, GM does similar things, primarily in Mexico, and Ford and Chrysler both do a good amount of their construction in Canada, which means the dollar sliding across the board will increase prices for DOMESTIC products. The sliding dollar will also cause increased pressure on import prices, so things actually made in other places will be more expensive as well.

Because we're an "import" economy, this means that costs are going up, but there is no concurrent increase in revenue, so wages (the demand side of that supply-demand equation remain stagnant. This also applies in other areas as well. The computers we're reading this on are most likely made out of all, or nearly all, imported parts and just assembled here, and those two products are not unique, far from it in fact.

The results on the international markets has already started this morning, with the Nikkei (the Japanese version of the Dow) down a bit under a percent, with expected slides in US companies on the German and British exchanges later today. We'll see how that goes.

One thing that will prove interesting will be oil. With the dollar sliding, one would expect that the price of oil will increase further. This may not actually be the case, but there's a pretty big BUT at the end of this. Oil prices are universally done in terms of US dollars. If you're in Germany, you take your Euros, buy dollars and then use those dollars to buy oil. This is something that was done by of all people OPEC. Thirty odd years ago, their #1 trading partner was us, and so to make oil transactions simple globally, they benchmark the price of oil in dollars. It worked for them and so now, all oil exporting companies/nations handle this pretty much the same way. They sell oil for dollars.

So, what happens to the price of oil? Good question. Other countries, notably European ones are in theoretically good shape. Their money is worth more, so oil costs less. Some other countries, notably Japan are going to get squeezed. They export heavily to us, so the sliding dollar hurts them, pretty badly in fact. But, the sliding dollar also means that oil is less expensive. The bottom line I think is that the sliding dollar hurts them more than it helps them. Oil is cheaper, but because we're not buying as much stuff, they don't need the oil and so they aren't helped by the decreased costs as much as they're... [ Read More (0.2k in body) ]

Yahoo! News - Dollar Hits New Low, Gold at 16-Yr High


Yahoo! News - AP Photo - Ken Lay
Topic: Business 1:58 pm EDT, Jul  9, 2004

] Former Enron CEO Ken Lay, left, is led into Federal Court
] by law enforcment officers in Houston Thursday July 8,
] 2004.

Nothing like a good perp walk.

Yeah... it wasn't as entertaining as the infamous "low speed chase" but then all OJ did was allegedly whack his ex wife and hoyfriend. This guy screwed the retirement money of a few thousand people.

Yahoo! News - AP Photo - Ken Lay


Dividend Voodoo (washingtonpost.com)
Topic: Business 1:29 am EDT, May 21, 2003

When Warren Buffet, formerly the richest man in America (he's down to #2 on the list at 30+ BILLION dollars) says this...

] Now the Senate says that dividends should be tax-free to
] recipients. Suppose this measure goes through and the
] directors of Berkshire Hathaway (which does not now pay a
] dividend) therefore decide to pay $1 billion in dividends
] next year. Owning 31 percent of Berkshire, I would
] receive $310 million in additional income, owe not
] another dime in federal tax, and see my tax rate plunge
] to 3 percent.
]
] And our receptionist? She'd still be paying about 30
] percent, which means she would be contributing about 10
] times the proportion of her income that I would to such
] government pursuits as fighting terrorism, waging wars
] and supporting the elderly. Let me repeat the point: Her
] overall federal tax rate would be 10 times what my rate
] would be.

I certainly hope someone is listening.

Dividend Voodoo (washingtonpost.com)


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