11.30.07
How to take advantage of the weak dollar
The economic laws of supply, demand, expectations and speculation work in the long run – it’s just that its sometime difficult to predict when the long run will occur. The mistakes of US economic policy over the past ten years (tax policy that gives incentives to spending over investing, large federal deficits, an energy policy that encourages petroleum imports, lax regulation of the mortgage market to name a few) have caught up with the US. We’re now facing a probable recession that will take several years to work through. One by-product is that the dollar has weakened substantially and it is part of the self-correcting nature of the markets. (The increase in exports helps expand the economy and jump start consumption.)
If your products are denominated in dollars, now is the time for your business to look at international markets. There are some short term profits that can be made solely on the basis of price and you can find those opportunities relatively easily. The mistake that many international business managers make is not following up on the low price “teasers” made possible by the favorable exchange rate. Take advantage of the opening by strengthening your international market presence: you should identify your customers, work as appropriate with distributors or local representatives and find ways to differentiate your produce/service from the competition in that market.
A recent study by the San Francisco Federal Reserve found that the export boom ended when the Fed raised interest rates as the economy matured. Thus, in your market strategy, use the opening to gain new markets and keep a close watch on the Fed’s interest rate policy (particularly the differential with the Euro rates). When the rates change direction, that is the time to work aggressively to keep the international markets.
You’ll find that if you can establish your product through weak and strong dollars, you will have a corporate strategy that will get allow you to weather weak domestic markets by expanding exports.
What is your stategy to take advantage of the weak dollar?
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