Comments on: The Euro vs. Dollar double gambetto for high tech corporations http://www.techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/ A Technology and Business Weblog provided to You by a Global Group of Friends. Wed, 29 Dec 2010 19:44:30 +0000 hourly 1 http://wordpress.org/?v=3.0.4 By: Kari Silvennoinen http://www.techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3417 Kari Silvennoinen Sun, 18 Nov 2007 16:09:26 +0000 http://techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3417 > Althoug I acknowledge the trickiness of the situation for export businesses, high tech or not, I see very few corporations have implemented hedging strategies or make proper use of forward contracts - which is a shame. Interestingly enough, currency hedging was the topic of my master's thesis... =) But you're right, very few companies, even though their income might be dependent on foreign currency, apply any proper hedging strategies for their currency positions. One problem is of course lack of awareness of these instruments and the other that currency trading is quite often over-the-counter, which means it may be way too expensive for smaller companies - even though the risks of currency fluctuations might be a significant risk factor for them. > Althoug I acknowledge the trickiness of the situation for export businesses, high tech or not, I see very few corporations have implemented hedging strategies or make proper use of forward contracts – which is a shame.

Interestingly enough, currency hedging was the topic of my master’s thesis… =)

But you’re right, very few companies, even though their income might be dependent on foreign currency, apply any proper hedging strategies for their currency positions. One problem is of course lack of awareness of these instruments and the other that currency trading is quite often over-the-counter, which means it may be way too expensive for smaller companies – even though the risks of currency fluctuations might be a significant risk factor for them.

]]> By: Marc Duchesne http://www.techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3419 Marc Duchesne Thu, 15 Nov 2007 09:24:59 +0000 http://techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3419 Sort of agree with you, Jeremy ! Keep blogging, _Marc Sort of agree with you, Jeremy !

Keep blogging,

_Marc

]]> By: Emmanuel Perez-Duarte http://www.techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3420 Emmanuel Perez-Duarte Wed, 14 Nov 2007 21:05:39 +0000 http://techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3420 Haha, yes, that may be it. Also bear in mind that "a sluggish economy" may have different meanings across countries. A growth of, say 1.5% of GDP in Switzerland is ok, whereas 1.5% in the US is terrible: in one case you are at potential growth, in the other you are far below it. So if the US and the EU are both at 2% growth, economists may consider that the EU is indeed outperforming the US. That said, for 2007, the EU should still grow faster in actual figures (economists' estimates at around 2.4% vs. 1.9%). :) Haha, yes, that may be it. Also bear in mind that “a sluggish economy” may have different meanings across countries. A growth of, say 1.5% of GDP in Switzerland is ok, whereas 1.5% in the US is terrible: in one case you are at potential growth, in the other you are far below it. So if the US and the EU are both at 2% growth, economists may consider that the EU is indeed outperforming the US.

That said, for 2007, the EU should still grow faster in actual figures (economists’ estimates at around 2.4% vs. 1.9%). :)

]]> By: Steve Danino http://www.techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3421 Steve Danino Wed, 14 Nov 2007 20:03:47 +0000 http://techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3421 OK, this may be because I am living in France, one of Europe's sluggiest countries since forever. OK, this may be because I am living in France, one of Europe’s sluggiest countries since forever.

]]> By: Emmanuel Perez-Duarte http://www.techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3424 Emmanuel Perez-Duarte Wed, 14 Nov 2007 17:40:11 +0000 http://techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3424 Not these days... Not these days…

]]> By: Steve Danino http://www.techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3418 Steve Danino Wed, 14 Nov 2007 15:50:01 +0000 http://techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3418 Emmanuel, I always thought that US's growth outperformed the EU... Emmanuel, I always thought that US’s growth outperformed the EU…

]]> By: Vincent van Wylick http://www.techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3422 Vincent van Wylick Wed, 14 Nov 2007 12:19:58 +0000 http://techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3422 I was going to write something similar to Emmanuel, but along the line that, like in chess, international business will require more variables to think about, besides the exchange rate (which is still an important consideration). But since Emmanuel put it so eloquently, I'll just go "yay, Europe, boo USA!" :-) I was going to write something similar to Emmanuel, but along the line that, like in chess, international business will require more variables to think about, besides the exchange rate (which is still an important consideration).

But since Emmanuel put it so eloquently, I’ll just go “yay, Europe, boo USA!” :-)

]]> By: Emmanuel Perez-Duarte http://www.techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3423 Emmanuel Perez-Duarte Wed, 14 Nov 2007 11:34:42 +0000 http://techiteasy.org/2007/11/14/the-euro-vs-dollar-double-gambetto-for-high-tech-corporations/#comment-3423 I must say although I agree with the general idea (buy high tech and software while it's still time), the euro/dollar analysis would require just a bit more digging. On a first level analysis, yes, a strong euro may mean a bonanza, everything is cheap abroad, let's buy. But on the same level, revenues are quite not the same because exporting gets harder, so I suspect "investing massively" could get a "not right now" answer most often than not. Let's see this in closer detail. What is a "strong" currency? Contrary to popular belief, it is not a currency that trades at a "high level" (when one thinks about this, it actually doesn't mean anything), but rather a currency that appreciates steadily against a trade-weigthed basket of other currencies. The situation today is not really that of a strong euro - but that of weak dollar. It may seem a play on words, but it isn't. The exchange rate today does not reflect the upcoming of the euro as an international currency since its introduction in 1999 (the actual bills and coins in 2002 was actually only a technical matter that didn't change anything on world trade), but mostly reflects the de-coupling of world growth: the US, for a change, are being left behind emerging countries and the EU. Moreover, this has been exacerbated by the financial crisis of the summer and the Fed's decision to cut rates. I must say although I agree with the general idea (buy high tech and software while it’s still time), the euro/dollar analysis would require just a bit more digging.

On a first level analysis, yes, a strong euro may mean a bonanza, everything is cheap abroad, let’s buy. But on the same level, revenues are quite not the same because exporting gets harder, so I suspect “investing massively” could get a “not right now” answer most often than not.

Let’s see this in closer detail. What is a “strong” currency? Contrary to popular belief, it is not a currency that trades at a “high level” (when one thinks about this, it actually doesn’t mean anything), but rather a currency that appreciates steadily against a trade-weigthed basket of other currencies. The situation today is not really that of a strong euro – but that of weak dollar. It may seem a play on words, but it isn’t. The exchange rate today does not reflect the upcoming of the euro as an international currency since its introduction in 1999 (the actual bills and coins in 2002 was actually only a technical matter that didn’t change anything on world trade), but mostly reflects the de-coupling of world growth: the US, for a change, are being left behind emerging countries and the EU. Moreover, this has been exacerbated by the financial crisis of the summer and the Fed’s decision to cut rates.

]]>