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Minyan Mailbag: Why are the Aussie and Kiwi Dollars Dropping?

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Think "fire" in the cinema or a "free beer" sign outside a pub.

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Laurie,

Any thoughts on the recent drops in the Aussie dollar and (especially) the Kiwi dollar, or is that not your game?

Minyan Conor

MC,

My take is that NZ is a tiny bond, equity and fx market and many directional moves are exacerbated due to relatively minor capital flows running at the same door at the same time(both ways). Think "fire" in the cinema or a "free beer" sign outside a pub. You get knocked down in the rush! The Norway/Iceland contagion started a whole rush out of "second tier" currencies and it doesn't take long to wipe out years of profits when the "rush" happens.

The Aussie dollar should remain above 70c IMO, but I wouldn't mind seeing lower so I can get some long dated currency hedges in place for the new venture which will have large aud/usd translation risk. The commodity story is alive and well and should hold Aussie in better stead than the Kiwi. It is rather ironic that I saw someone saying that some country's debt was "an incredible 5% of GDP" and that was really troublesome blah blah blah. Aussie is over 5% and what is the USA currently running at?? Hmmm.

Local News

I will be in NZ on Thursday for 4 days of hunting Trout (polaroiding and stalking the crystal clear rivers) – staying on a 30,000 acre high-country, sheep farm that produces seriously high-micron Merino wool used in Icebreaker clothing- the finest/warmest/best thermal clothing I have ever worn, and I got my first item back in about 1999 – others love it too.

I don't get a cent for recommending them to anyone, but anyone who lives in New York/Toronto/Europe who doesn't have this stuff must be either uninformed or crazy. Check their website, I think you can get them in NY.

The sheep farmers who we stay with have been running their family property for 40 years and are mates of 10 years. I will get the low down on the NZ economy/politics etc. from a real hard working producer 's viewpoint. They are hurting due to the currency – lots.

Let's hope the big trout are running in the rivers and I have the right flies in my box of tricks( anything under 6 pounds and 20 inches doesn't count as a fish!!). In fact, I better go find my rod and gear- it's been a couple of years since I last let my 6 weight Sage work its magic on a river.

Old Chinese Proverb
If you want to be happy for a few hours, get drunk,
If you want to be happy for a week, kill your pig and eat it,
If you want to be happy for a month, get married,
If you want to be happy for the rest of your life, go fishing.


Best,

Laurie.

No positions in stocks mentioned.

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