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U.S. Dollar Devaluation


Tommm50
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I know this is obvious to most but for some reason I can't quite connect the dots. I'm a U.S. citizen holding a sizable number of FFH shares (since 2003). Since the delisting on the NY Exchange of course they are on the pink sheets. I hold them in an IRA account with E*Trade and they won't allow me to hold the shares on the Toronto Exchange. I therefore have shares of a Canadian company in U.S. dollars. My question is: If the U.S. dollar devalues won't the US dollar value of the FFH shares actually increase or do I have this backwards?

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You are correct:  Us dollar goes lower relative to Cnd dollar and shares should appreciate in US currency.  IMO it is unlikley that there is much chance of CDN dollar exceeding par.  It is more likely that the Us dollar will appreciate from here or no change.

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Guest broxburnboy

If the US dollar appreciates against the CDN%, the SP in Canadian dollars will fall (all other fundamentals assumed to be constant)

If the US dollar depreciates against the Loonie, the SP in Canadian dollars will rise.

 

The only kicker is that most of FFH's revenues are from the US operations and therefore the current exchange rate is already factored in to the CDN current price.

 

The international component of the revenues should provide a hedge for US investors, assuming that the Buck continues to depreciate vis-a-vis the basket of currencies which represent  the components of FFH's international revenues.  I think.

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I  have been trying to figure out how to invest in some companies that are not denominated in US dollars because of the potential devaluation of the US dollar. The problem that I am having is that so many of the companies that I have looked at which are located abroad do much of their dealings in US dollars and so even when the company is located in Israel a drop in the dollar would have a significant negative impact on the company at least temporarily.

 

Am I looking in the wrong places to try to get away from the US dollar? In our interconnected world is it worth it to strive for access to other currencies. To date with the exception of a few very minor positions in non US companies the only way I have been outside the us is by using international Mutual funds.

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I don't believe devaluations of currencies doing a lot of business with the US (Canada/Mexico) is a concern. I pretty obvious the central banks will act to lower their currency's value if the US$ goes down.

 

If the country does not do lots of business with the US then it's another story.

 

BeerBaron

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I know this is obvious to most but for some reason I can't quite connect the dots. I'm a U.S. citizen holding a sizable number of FFH shares (since 2003). Since the delisting on the NY Exchange of course they are on the pink sheets. I hold them in an IRA account with E*Trade and they won't allow me to hold the shares on the Toronto Exchange. I therefore have shares of a Canadian company in U.S. dollars. My question is: If the U.S. dollar devalues won't the US dollar value of the FFH shares actually increase or do I have this backwards?

 

The currency of the stock quote is irrelevant. To understand your true FX exposure, you must look to the underlying business. IN the case of FFH, a significant portion of their business is USD denominated but they do have CAD and other currency exposure.

 

It's the same logic WEB applies for holding businesses with significant overseas earnings like KO. That thes stock is quoted in USD is not of concern. It could be quoted in Zimbabwean currency for all we care but it will reflect the value of its underlying business in the long run.

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