Tuesday, September 20, 2005
Kirubakaran: My Buys
¶ 9:58 AM 
I read in 'Yahoo Finance' that the Feds are definitely going to hike the interest rate.
If the Feds hike the interest rate, there will be an increased foriegn investment. If there is an increased foriegn investment into the US, due to higher demand for the dollar (for conversion) the value of the dollar will go up. If the value of the US dollar goes up, export from US will decrease and import into US will increase.
Feds are doing this interest rate hike to rein in the inflation which is being caused by economic development. so, given the fact that economy is doing good, we can be sure that people will be buying more cars. also it is going to be a bigger profit for honda and toyota (imports into US) due to the higher value of the dollar.
Hence I bought HMC (10 shares) and TM (3 shares). Lets see how it goes...
My reasoning above is thanks to macrowave investing techniques taught in 'If it is raining in Brazil, buy Starbucks' book which is available for less than $10 in the Half Price book store. I can buy it for you if you want.
Comments:
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The discussion comes to, what was the impact on these companies when the dollar was low ? How could they sustain in business ? Well, the fact is, most of the Hondas / Toyota are manufactured here in US. They may be getting couple of parts from Japan or somewhere else… Looking at the Dollar angle, Europe has been hit most when Dollar went down and Euro went up. All the European products prices went up by 30% or so. Forexample all the beautify products from France started costing 30% more… So, if any one is going benefit more of the Dollar increase, it would be European companies.
Regarding the reason why the feds are increasing the dollar price? They want to control the inflation. When the economy grows, inflation also grows due to increase in demand for everything, especially demand for people. Why inflation is so important…??? Imagine someone based on today inflation rates thinks $1 million is enough to retire in 10 years and after he retires he realizes that 1 million would just him a meal in Olive Garden… what would happen? He has shoot himself with the all the guns he accumulated over the years…. 1 million dollar a meal.. you wouldn’t be surprised if you were in Soviet Union and Russia …
--Mallik
Regarding the reason why the feds are increasing the dollar price? They want to control the inflation. When the economy grows, inflation also grows due to increase in demand for everything, especially demand for people. Why inflation is so important…??? Imagine someone based on today inflation rates thinks $1 million is enough to retire in 10 years and after he retires he realizes that 1 million would just him a meal in Olive Garden… what would happen? He has shoot himself with the all the guns he accumulated over the years…. 1 million dollar a meal.. you wouldn’t be surprised if you were in Soviet Union and Russia …
--Mallik
# posted by 
: 10:37 AM
: 10:37 AM
That was a good explanation about inflation, Mallik.
I feel that it is not that important whether the manufacturing is done in US/Japan.
US$ price of a Honda Civic is going to be constant irrespective of dollar value. So if the dollar value is more, it will give more Yens for Honda and hence more profit shown later. You would have noticed the jump in share price of foriegn companies today.
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I feel that it is not that important whether the manufacturing is done in US/Japan.
US$ price of a Honda Civic is going to be constant irrespective of dollar value. So if the dollar value is more, it will give more Yens for Honda and hence more profit shown later. You would have noticed the jump in share price of foriegn companies today.
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