euro is way down: is US pricing reflecting this?

[jbinbi]

I looked at some cats 2 years ago, specifically the new lagoon 380. Last year, the price was really high as the euro was very strong to the $. Now the euro is down 13% vs. last year. Is this reflected in the US price or have US lagoon dealers kept the price up?

[rjrendemd]

I too have been in the market for a cat for some time. I went to Annapolis in October expecting to see some discount in pricing reflecting either the economy or the fall in the Rand or the Euro. The price reductions were typical boat show specials. Since returning home however the FP rep called me and announced about a $75K reduction in the list price of the Salina. The Lagoon reps are saying "just make an offer, you might be surprised" and the rumor is that they have 2 years of inventory. I know for fact that Lagoon is taking Florida real estate in trade for their boats! The Lagoons under 50 feet are still priced in dollars but if you do the math with the exchange rate over the past year the Euro was at $1.57 and is now about $1.20. I am certain that you would see similiar reduction in the price you would pay for a European Cat. I wonder what affect this will have on the used market as I have not seen significant reductions in the asking price of used boats I have been interested in.

[TaoJones]

For those who think that the soaring US$ since mid-July is a reflection of the fundamental value of the American currency, consider this:

expend.png (image)

"What does that prove?," you may ask.

Simply this - if you have US$ already, the US$ price for non-US manufactured goods will be less than it was pre-July, but don't wait too long to make your purchase! The link above provides graphic proof that the path of least resistance for the US$ is down, probably sooner rather than later, and its purchasing power will diminish accordingly as the imminent inflation in prices that the chart infers is, in my view, unavoidable.

If you have Euros, the US$ price is irrelevant, inasmuch as you would first have to buy dollars with your Euros to make a US$ purchase. The net benefit of doing so is zero (actually less than zero, as charges will result in a slight haircut). It would be simpler to buy the item in Euros in the first place.

The only way to win that game is to have anticipated the rising dollar pre-July, sold Euros and bought dollars, then ridden the dollar up. At that point (now!), make your purchase before the dollar collapses again, then let all your friends know what a far-sighted financial genius you are. Unfortunately, one robin doesn't make a spring, so unless you can repeatedly make such winning transactions, once is nothing more than luck.

The US$ is presently $1.2659 to the Euro, by the way. My best guess is that very soon now, most likely, the US$ will break through support and fall as quickly as it rose beginning mid-summer. When it does, its purchasing power will fall, too, and any momentary Forex advantage will evaporate.

The foregoing applies to any currency, save Japanese yen, which a person may have exchanged for US$ pre-July. Such an individual will be sitting on a nice gain, but if the intention is to use the funds for a US$ purchase, do it now! If that isn't feasible, then at least exchange out of US$ for another currency that will, most likely, appreciate against the US$ in the near future.

TaoJones

[kevingy]

Originally Posted by rjrendemd

the rumor is that they have 2 years of inventory

Wow. That's quite a turnaround, if the rumor is true. When I was at Strictly Sail Miami in February, Lagoon reps were claiming a 2+ year backlog.

[TaoJones]

Originally Posted by TaoJones

<snip>The US$ is presently [30 Nov, 2008] $1.2659 to the Euro, by the way. My best guess is that very soon now, most likely, the US$ will break through support and fall as quickly as it rose beginning mid-summer. When it does, its purchasing power will fall, too, and any momentary Forex advantage will evaporate.<snip>

Since I wrote the above on the last day of November - i.e. just nineteen days ago - the US$ has indeed dropped through support. In that short span of time, it has given back about half of all the gains it had made since it began its ascent mid-July. The Fed's decision to drop the Fed Funds rate to, essentially, 0% a couple of days ago was the coup de gras for the American dollar.

It would probably prove unwise to assume that the rapid drop in value over the last three weeks is the extent of the devaluation one might expect to see in the US$. So far, the loss in the Euro/US$ cross is about 13.5% - a huge move in the currency market in such a short span of time, but very likely not the end of it.

So, if anyone has been sitting on a pile of US$, waiting to make a significant purchase like a new European-manufactured catamaran, you'll most likely find it advantageous to buy sooner, rather than later. Believing that the US$ will strengthen again from current levels could well cost you a whole lot more, going forward.

Here's a link to an on-point story in today's Washington Post:

Dollar's Slump Erases Months Of Solid Gains - washingtonpost.com

TaoJones

[Tropic Cat]

The Fed rate dropping is significant, but only 1/2 the story. US bond sales have been holding up very well as the world has been fleeing to safety. However, The US Government is about to print up enough bonds to cover the announced bailouts. The shear $ amount of these offerings will exceed the market's ability to purchase them. Japan who has traditionally been a huge US bond buyer, recently explored the possibility of the new US bond offerings being sold in YEN, not dollars. It appears they have little interest in purchasing new offerings. Who can blame them?

When this event occurs the Fed will begin buying them. (Fed announcement two weeks ago) In effect the government will be buying it's own bonds. When that happens, the floor will disappear and the $ value will plunge and inflation will be in double (triple??) digits.

In short, I agree with TaoJones.

Buy Gold, or a European boat (I had to tie this back into the original thread) NOW.

[Adaero]

You guys think you've got it bad take a look at the the GB pound!!

10 months ago when I went to the Miami show we were getting over $2 USD to the pound and nearly €1.40 Euro. As of today the GBP has lost 25% against both the USD at $1.49 and Euro when it hit an all time low of €1.05 this week.
All of our banks have had to bailed out with government handouts and we about to also have our interest rates dropped to nearly 0%. It seems the only strong stable place at the moment is Euro land but they are also approaching the same recession as the rest of us. Dehler yachts in Germany have been bailed out twice now by the government and a few French yards are also in trouble.
When will it all end?
Merry Christmas to all
Adaero

[TaoJones]

Originally Posted by Adaero

You guys think you've got it bad take a look at the the GB pound!!

10 months ago when I went to the Miami show we were getting over $2 USD to the pound and nearly €1.40 Euro. As of today the GBP has lost 25% against both the USD at $1.49 and Euro when it hit an all time low of €1.05 this week.
All of our banks have had to bailed out with government handouts and we about to also have our interest rates dropped to nearly 0%. It seems the only strong stable place at the moment is Euro land but they are also approaching the same recession as the rest of us. Dehler yachts in Germany have been bailed out twice now by the government and a few French yards are also in trouble.
When will it all end?
Merry Christmas to all
Adaero

Welcome to the Forum, Adaero, and Merry Christmas to you, and yours, as well.

The anomaly of the GBP failing to keep pace with the Euro, as it historically has tended to do, and instead following the US$ lower against the Euro is addressed here:

Oil and Dollar Plunge, Gold Soars, TARP Out of Cash, Automakers Brace for Worst, A Currency Trade, and More! | 5 Min. Forecast

Scroll down to the 02:02 mark for a graph that illustrates the point.

Is it tradable? Perhaps. But one should tread carefully - it's entirely possible that Forex traders now see the Pound and the British economy as more in tune with the US than greater Europe. If so, the former high correlation of the GBP and the Euro will diminish.

Again, welcome aboard, Adaero. Glad you're here.

TaoJones

[TaoJones]

Originally Posted by Tropic Cat

The Fed rate dropping is significant, but only 1/2 the story. US bond sales have been holding up very well as the world has been fleeing to safety. However, The US Government is about to print up enough bonds to cover the announced bailouts. The shear $ amount of these offerings will exceed the market's ability to purchase them. Japan who has traditionally been a huge US bond buyer, recently explored the possibility of the new US bond offerings being sold in YEN, not dollars. It appears they have little interest in purchasing new offerings. Who can blame them?

When this event occurs the Fed will begin buying them. (Fed announcement two weeks ago) In effect the government will be buying it's own bonds. When that happens, the floor will disappear and the $ value will plunge and inflation will be in double (triple??) digits.

In short, I agree with TaoJones.

Buy Gold, or a European boat (I had to tie this back into the original thread) NOW.

You're right, Rick. There is much more to the story. The recent phenomenal rise of the US$ against virtually all of the world's other currencies (except the Japanese Yen) was driven by the unprecedented chaos (at least recently) in the world's investment and credit markets.

With the sky falling everywhere, money managers were desperate to move to safety, but with few options. Historically, only precious metals were perceived as ultimately-safe storehouses of value. In the recent chaos, however, even precious metals were being sold down as highly-leveraged investors (mostly, hedge funds) were forced to sell even their most profitable positions to raise cash and meet an unrelenting tide of margin calls.

As the precious metals were driven lower, only the US$ was seen to be a safe haven. The irony of people selling their precious metals to buy paper (typically, T-Bills and T-Notes) in a mad scramble for "safety" will one day be the subject of PhD dissertations, I'm sure.

The effect of such actions was the rapid appreciation of the US$. But few will be willing to leave their capital invested in depreciating (now) dollar-denominated paper with a 0% yield for very long. When that hoard of cash re-enters the markets, in my view, the result will be spectacular. Not all of it will go into precious metals, of course, but if even a tenth of it does, precious metals will rocket upwards.

The Japanese, and their Yen, are curious. As an export-driven economy, they perceive it in their best interest to have a weak Yen, and they actively enter the Forex markets to sell their currency down. The way they "sell" Yen is by buying (mostly) American Dollar-denominated paper (bills, notes, bonds). This drives the Yen down and the US$ up.

However, the US now perceives the devaluation of the US$ as in its best interest, so something has to give. The Americans and the Japanese can't both devalue their currencies at the same time, at least not against each other, so it's the rest of the world's currencies that must appreciate to satisfy this desire. This is the phenomenon known as "The Race to the Bottom."

But the world is run on the paper-currency system, and people are beginning to catch on that all paper is, intrinsically, worthless. Some currencies are more worthless than others, of course, but it's a question of degree, not kind.

Unfortunately for the Japanese, they are a nation of savers, not spenders, so their currency is deemed more valuable than the US$ by foreign exchange traders who understand the game. At the same time, the Chinese have established a formidable export-driven economy of their own, so the Japanese are under incredible pressure and have few options, presently.

With trillions of Yen already "invested" in US Treasuries, virtually every nook and cranny in Japan is stuffed full of US$-denominated paper. Will they continue the same tactic of selling yen to buy US$, even though it finds them sitting atop the world's most valuable currency in spite of their heroic efforts to drive their currency down?

Stay tuned . . .

TaoJones

[rougewave]

I learned something today ...