Economic Crisis, Dollar, Three-Tier System

J

Joe Dressner

Joe Dressner
The dollar is at 1.37999 this morning. Only weeks ago we feared that it would go to 1.6 and above.

Can someone explain to me why the dollar is strengthening at this time of economic crisis?

Will this mean cheaper wine prices? Immediately, no. Importers buy futures and buy Euros in an inexact, unscientific manner. In general, whenever we buy Euros the dollar strengthens immediately afterward.

For instance, we bought a lot of Euros when the dollar went to about 1.5 figuring it wasn't going to get much better than that. Furthermore, we have inventory which was bought at a far higher rate. We spent that money already and cannot price our wines as if we bought everything at 1.3799.

Even furthermore, the New York State wine regulations mandate that we post our wholesale prices (for both the state and for out-of-state sales) over one month in advance for the beginning of the month. Let's say a container arrives today, the earliest possible revision for us would be for December 1st (it is already too late to change pricing for November as you have to do this before the first of the month). Do you imagine we know where the dollar is going to be on December 1st?

Ever further furthermore, I bring you these tidbits to show just how glamorous being ITB can be!
 
Can someone explain to me why the dollar is strengthening at this time of economic crisis?
Click to expand...

In academic synopis:
Because what the sheeple thought was only confined to America has spread the contagion around. Europe is no longer the island it once was and their shit
is hitting the fan.
 
originally posted by Joe Dressner:
And why would they imagine America is a refuge?
Click to expand...

not so much that america is a refuge, but the euro offers no present advantage and oil is purchased in dollars...
 
Is this really a serious question? The dollar was undervalued for sometime given the state of the European economy, which was, until this last crisis, by any measure worse than ours and with downward pressure on interest rates that was stronger than ours. As bad as the current crisis is here, it has leached out to Western Europe at least, with French Presidents and German Prime Ministers begging for Congressional action. Meanwhile, tightening credit has substantially raised interest rates here, which attracts foreign investment, as I expect does bargain basement prices of various equities. And finally, fear of serious recession has driven the price of oil, in dollars, down.
 
originally posted by Joe Dressner:
Economic Crisis, Dollar, Three-Tier SystemThe dollar is at 1.37999 this morning. Only weeks ago we feared that it would go to 1.6 and above.

Can someone explain to me why the dollar is strengthening at this time of economic crisis?

Will this mean cheaper wine prices? Immediately, no. Importers buy futures and buy Euros in an inexact, unscientific manner. In general, whenever we buy Euros the dollar strengthens immediately afterward.

For instance, we bought a lot of Euros when the dollar went to about 1.5 figuring it wasn't going to get much better than that. Furthermore, we have inventory which was bought at a far higher rate. We spent that money already and cannot price our wines as if we bought everything at 1.3799.

Even furthermore, the New York State wine regulations mandate that we post our wholesale prices (for both the state and for out-of-state sales) over one month in advance for the beginning of the month. Let's say a container arrives today, the earliest possible revision for us would be for December 1st (it is already too late to change pricing for November as you have to do this before the first of the month). Do you imagine we know where the dollar is going to be on December 1st?

Ever further furthermore, I bring you these tidbits to show just how glamorous being ITB can be!
Click to expand...
I have to admit it does sound glamorous: buying futures and Euros, inexact and unscientific. Posting wholesale prices with the State of New York; trying to imagine where the dollar will be on December 1st. I imagine a lot of people, including many attractive young women, are asking you why the dollar is strengthening at this moment, and what the future holds for all of us? We the disordered are flattered that you seek our input.
 
originally posted by Jonathan Loesberg:
Is this really a serious question? The dollar was undervalued for sometime given the state of the European economy, which was, until this last crisis, by any measure worse than ours and with downward pressure on interest rates that was stronger than ours. As bad as the current crisis is here, it has leached out to Western Europe at least, with French Presidents and German Prime Ministers begging for Congressional action. Meanwhile, tightening credit has substantially raised interest rates here, which attracts foreign investment, as I expect does bargain basement prices of various equities. And finally, fear of serious recession has driven the price of oil, in dollars, down.
Click to expand...

For a Lit Professor, he's not bad!

The European economies, particularly Spain, Italy, and France are just as fucked as ours, it just hasn't shown up yet. Not only that, but structural issues make it harder for the economies to adapt.

I bet the Germans wish they still had the mark.
 
originally posted by Joe Dressner:
Economic Crisis, Dollar, Three-Tier SystemThe dollar is at 1.37999 this morning. Only weeks ago we feared that it would go to 1.6 and above.

Can someone explain to me why the dollar is strengthening at this time of economic crisis?

Will this mean cheaper wine prices? Immediately, no. Importers buy futures and buy Euros in an inexact, unscientific manner. In general, whenever we buy Euros the dollar strengthens immediately afterward.

For instance, we bought a lot of Euros when the dollar went to about 1.5 figuring it wasn't going to get much better than that. Furthermore, we have inventory which was bought at a far higher rate. We spent that money already and cannot price our wines as if we bought everything at 1.3799.

Even furthermore, the New York State wine regulations mandate that we post our wholesale prices (for both the state and for out-of-state sales) over one month in advance for the beginning of the month. Let's say a container arrives today, the earliest possible revision for us would be for December 1st (it is already too late to change pricing for November as you have to do this before the first of the month). Do you imagine we know where the dollar is going to be on December 1st?

Ever further furthermore, I bring you these tidbits to show just how glamorous being ITB can be!
Click to expand...

I've recently been considering a career change to the wine business.

I feel like my experience in academic research has given me the tools to travel around France and Italy and uncover new and exciting producers.

It has to be so much fun to just travel and taste and dine with all these vignerons. I bet it doesn't even seem like work at all. Staying in their Chateau, drinking fine old vintages. Pretty soon, I feel like I'll have enough saved so that I can put my life savings into the wine business.

All that fun, minor celebrity, and making great money too. You have it made.
 
The general tendencies about the imbalance between the Euro and Dollar are certainly true. But why correct it now?

It seems like a totally irrational market movement.

I've put all my personal money in Luxembourg.
 
originally posted by Joe Dressner:
The general tendencies about the imbalance between the Euro and Dollar are certainly true. But why correct it now?

It seems like a totally irrational market movement.

I've put all my personal money in Luxembourg.
Click to expand...

Bad move.

Buy guns and ammo. You'll need it.
 
originally posted by VLM:
originally posted by Jonathan Loesberg:
Is this really a serious question? The dollar was undervalued for sometime given the state of the European economy, which was, until this last crisis, by any measure worse than ours and with downward pressure on interest rates that was stronger than ours. As bad as the current crisis is here, it has leached out to Western Europe at least, with French Presidents and German Prime Ministers begging for Congressional action. Meanwhile, tightening credit has substantially raised interest rates here, which attracts foreign investment, as I expect does bargain basement prices of various equities. And finally, fear of serious recession has driven the price of oil, in dollars, down.
Click to expand...

For a Lit Professor, he's not bad!

The European economies, particularly Spain, Italy, and France are just as fucked as ours, it just hasn't shown up yet. Not only that, but structural issues make it harder for the economies to adapt.

I bet the Germans wish they still had the mark.
Click to expand...

You'd be surprised at how many lit. professors have the ability to read and comprehend the business pages of a newspaper.
 
Jonathan:

What newspapers and magazines do you regularly read to keep yourself informed about world events?

When did you first acquire a passport?
 
originally posted by Joe Dressner:
Jonathan:

What newspapers and magazines do you regularly read to keep yourself informed about world events?

When did you first acquire a passport?
Click to expand...

I never said I could read and understand newspapers. Once I've read Mary Worth and Mark Trail, I'm out of my depth.
 
originally posted by Joe Dressner:
Jonathan:

What newspapers and magazines do you regularly read to keep yourself informed about world events?

When did you first acquire a passport?
Click to expand...

I read the Economist. I love the pessimism, it makes me happy.

Would you be willing to help me get into the glamorous wine trade?
 
Welcome to the flat world my friends. We are all suffering from cognitive dissonance in believing that our feckless administration has the power to manipulate the money markets at home at will - it's like plowing the ocean.

The real moves are being made by the Warren Buffets of the world today. We are moving back into a World, not Nation, of the Old Boys Network, where the rest of us are just along for the ride.

The dollar is going to continue strengthen until it will likely see parity with the euro just as water seeks it's own level - Dollar, Euro, it's all just capital chasing the same goods in our empire of consumption.

Now can we get back to talking about wine?
 
A friend sells wine barrels and she followed Joe into the currency fluctuation abyss, hedging right up to about 1.57 before the dollar decided to get stronger. Now some of her customers want to pay her in Euros instead of dollars, even though they contracted to pay with US bucks. Quite a dilemma, and so much for anything resembling a profit margin for 2008.

-Eden (with friends in the distribution biz who've sold fewer than 10 cases of wine to customers in the past two weeks...they're getting moiderized out there!)
 
The dollar is going to continue strengthen until it will likely see parity with the euro just as water seeks it's own level - Dollar, Euro, it's all just capital chasing the same goods in our empire of consumption.[/quote]

Will this mean the end of the "send us your old gold jewelry and we'll send you cash!" commercials that I've been seeing? I should probably act now, right?

Best,
Kay
 
I don't know about your friends, but business is booming for us!

I watched Warren Buffet on Charlie Rose last night. Buffet said:

Historically, sin stocks have been considered to be recession proof, less prone to the cyclical downturns of the economy. Gambling, tobacco and alcohol are all habit-forming activities, thus there is an ever-ready pool of customers ready to purchase such goods and services, regardless of the economic conditions.

Mr. Buffet went on to say:

Alcohol is another outlet for troubled times, so distributors and manufacturers in this industry will continue to thrive. In times of financial distress it is the poorer consumer - the one often categorized as having a drinking problem - that will give up the sauce completely. The wealthy are the only ones who can afford to keep drinking, and it is their excess in times of despair that picks up the slack in the industry's profits.

The wealthy might trade down from big name wines to Touraine's declassified as Vin de Table, but they keep their habits going.
 
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