Let's look at what would have happened if you bought New Zealand dollars (using US dollars) 4 years ago, held them in a savings account in a bank, and sold them today. To keep the math easy, let's assume you're in a low tax bracket and don't pay taxes (hey, that's half the US now, right?).
mid-2007: Buy US$100 worth of NZ dollars. Exchange rate = 0.68 USD/NZD, so net = NZ$147.06
mid-2007 to mid-2008: Interest rate for savings account 7.4%, so NZ$157.94 at the end of the year
2008 to 2009: 7.2% --> NZ$169.31
2009 to 2010: 6.0% --> NZ$179.47
2010 to 2011: 5.0% --> NZ$188.45
mid-2011: Exchange NZ$188.45 back to USD. Current exchange rate = 0.81 USD/NZD, so net = US$152.64
That's a 52% gain over 4 years, or 11% compounded annually. 19% of the gain came from a weakening USD vs. NZD alone.
For comparison, gold has about doubled in USD terms over the same period, but pure USD deposits are up only a few percent.
Showing posts with label investments. Show all posts
Showing posts with label investments. Show all posts
Thursday, 23 June 2011
Tuesday, 3 March 2009
How bad is the Dow now, really?
Every once in a while, I like to break the Dow index down and look at the 30 individual components. I just finished comparing it to where is was on Jun 1, 2008. A few facts:
1 company was dropped from the average (AIG). Its price has dropped 99%. It was replaced with Kraft Foods.
1 other company has dropped more than 90%: Citigroup.
3 companies have dropped between 80 and 90%: Alcoa, BofA and GM.
[[MORE]]
5 companies have dropped between 50 and 80%: Dupont, Amex, Boeing, GE and Caterpillar.
The average itself has declined by 43.6%.
The top 3 best performing companies dropped 9.5% (McDonalds), 11.7% (Walmart) and 22% (Home Depot)
GM alone lost 45% of what all of the other companies earned together (on a per-share weighted basis).
The companies that are the largest components of the Dow are IBM, Exxon Mobil and Chevron.
Including AIG, the P/E on the Dow is 27. Excluding AIG and GM, the P/E is about 9.7. Historically, "reasonable" valuations are around 7 at the end of a bear market. Using the more optimistic number, that would put the bottom around 5100. Except earnings are declining rapidly with no end in sight and the impact of unfunded pension fund liabilities hasn't hit yet, either. If the P/E goes to 5 and earnings of the profitable companies drop by another 30%, that could be 2500.
The highest individual P/Es (which applies only to companies earning a profit) are 27.2 for Alcoa, 26 for JP Morgan, 16.4 for Coke and Home Depot is at a very questionable 15.2.
The lowest P/Es today are Caterpillar 4.3, GE 4.7, Amex 5.0 and Chevron 5.3.
A one-point move in any of the Dow components moves the Dow average by almost 8 points.
1 company was dropped from the average (AIG). Its price has dropped 99%. It was replaced with Kraft Foods.
1 other company has dropped more than 90%: Citigroup.
3 companies have dropped between 80 and 90%: Alcoa, BofA and GM.
[[MORE]]
5 companies have dropped between 50 and 80%: Dupont, Amex, Boeing, GE and Caterpillar.
The average itself has declined by 43.6%.
The top 3 best performing companies dropped 9.5% (McDonalds), 11.7% (Walmart) and 22% (Home Depot)
GM alone lost 45% of what all of the other companies earned together (on a per-share weighted basis).
The companies that are the largest components of the Dow are IBM, Exxon Mobil and Chevron.
Including AIG, the P/E on the Dow is 27. Excluding AIG and GM, the P/E is about 9.7. Historically, "reasonable" valuations are around 7 at the end of a bear market. Using the more optimistic number, that would put the bottom around 5100. Except earnings are declining rapidly with no end in sight and the impact of unfunded pension fund liabilities hasn't hit yet, either. If the P/E goes to 5 and earnings of the profitable companies drop by another 30%, that could be 2500.
The highest individual P/Es (which applies only to companies earning a profit) are 27.2 for Alcoa, 26 for JP Morgan, 16.4 for Coke and Home Depot is at a very questionable 15.2.
The lowest P/Es today are Caterpillar 4.3, GE 4.7, Amex 5.0 and Chevron 5.3.
A one-point move in any of the Dow components moves the Dow average by almost 8 points.
Wednesday, 11 June 2008
New Zealand energy and telecom investments
Here's an update on New Zealand from an energy and telecom-oriented investment perspective:
-- Broadband Internet is widely available in NZ. Fiber roll-outs are starting. Speeds of 3 Mbps are common in cities; higher in areas where cable is available. Hotspots aren't perhaps as widely available yet, and when they are, they tend to be outrageously expensive. NZ ISPs charge for data transfer, which does add to the costs. Vodafone and Telecom are perhaps the two largest, but they are by no means the only ones.
-- Electricity is relatively cheap in NZ because most of it comes from hydro power, esp. on the south island
-- NZ gets much of their own natural gas from the offshore Maui fields. Much more exploration and development has been going on over the last few years.
[[MORE]]-- One advantage of using gas canisters instead of piped-in gas is that you are much more independent that way. I have two canisters that I use only for cooking, and haven't had to recharge either one after 18 months.
-- Most NZ homes north of Canterbury (the region around Christchurch) and outside of the mountain regions don't have central heat. It's just not needed. A few electric space heaters work just fine for most people, and at a fraction of the cost. In older homes, insulation is relatively uncommon. (Kiwis are a fairly hardy bunch).
-- There are plenty of industry and investment opportunities in NZ. Check out PRC (Pike River Coal) and NZR (New Zealand Refining) on the NZ Exchange, for examples.
-- NZ has some interesting tax advantages: no taxes on capital gains (for anything from the sale of a house to the sale of stocks, etc), no inheritance taxes and very, very low property taxes. The government ran a surplus this year.
-- The NZ central bank runs independently of government, and has a mandate to fight inflation. That's why interest rates are high (over 8%), and why home prices have been declining.
-- The country is entering what looks like a gentle recession. Unemployment is up, but only modestly. It's still very low by global standards.
-- NZ has a no-nuclear policy. They are proud of their "clean and green" image; rightfully so, I think. They won't even allow US warships to dock here because of the US policy of not saying which of their ships carry nuclear materials.
-- NZ has a lot of farmers, millions of sheep, and a big and powerful dairy industry. It's also fairly rich in other commodities -- lumber, coal, etc. In a SHTF scenario, that could be considered a good thing.
-- Broadband Internet is widely available in NZ. Fiber roll-outs are starting. Speeds of 3 Mbps are common in cities; higher in areas where cable is available. Hotspots aren't perhaps as widely available yet, and when they are, they tend to be outrageously expensive. NZ ISPs charge for data transfer, which does add to the costs. Vodafone and Telecom are perhaps the two largest, but they are by no means the only ones.
-- Electricity is relatively cheap in NZ because most of it comes from hydro power, esp. on the south island
-- NZ gets much of their own natural gas from the offshore Maui fields. Much more exploration and development has been going on over the last few years.
[[MORE]]-- One advantage of using gas canisters instead of piped-in gas is that you are much more independent that way. I have two canisters that I use only for cooking, and haven't had to recharge either one after 18 months.
-- Most NZ homes north of Canterbury (the region around Christchurch) and outside of the mountain regions don't have central heat. It's just not needed. A few electric space heaters work just fine for most people, and at a fraction of the cost. In older homes, insulation is relatively uncommon. (Kiwis are a fairly hardy bunch).
-- There are plenty of industry and investment opportunities in NZ. Check out PRC (Pike River Coal) and NZR (New Zealand Refining) on the NZ Exchange, for examples.
-- NZ has some interesting tax advantages: no taxes on capital gains (for anything from the sale of a house to the sale of stocks, etc), no inheritance taxes and very, very low property taxes. The government ran a surplus this year.
-- The NZ central bank runs independently of government, and has a mandate to fight inflation. That's why interest rates are high (over 8%), and why home prices have been declining.
-- The country is entering what looks like a gentle recession. Unemployment is up, but only modestly. It's still very low by global standards.
-- NZ has a no-nuclear policy. They are proud of their "clean and green" image; rightfully so, I think. They won't even allow US warships to dock here because of the US policy of not saying which of their ships carry nuclear materials.
-- NZ has a lot of farmers, millions of sheep, and a big and powerful dairy industry. It's also fairly rich in other commodities -- lumber, coal, etc. In a SHTF scenario, that could be considered a good thing.
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