BajaNomad

Making sense of Peso valuation.

Woooosh - 12-31-2008 at 10:06 AM

After a lot of fluctuation months ago- the Peso had settled into a low 13:1 range and was hanging stable. I've notice the past week or so that the Peso is slipping lower towards 14:1 again. I know the demand for Mexican imports into the USA is very weak and will be until the USA and world economy recovers- but what are the other factors weakening the peso today?

As I type it as at 13.97 (not sure if that is buy or sell). I noticed the Euro and pound hit parity yesterday. Are there connections to the Peso or is everone just headed for the relative safety of US Treasury bonds- keeping the dollar strong?

Bill Clinton came to Mexico's rescue when the Peso collapased in the 80's. GW Bush never forgave Mexico for not backing the USA in the intial stages of the Iraq war and took it out on Mexico by squashing immigration reforms. Mexico and immigraton never even surface as a presidential election topic. So what is next for the Peso and what role will Obama have?

[Edited on 12-31-2008 by Woooosh]

[Edited on 12-31-2008 by Woooosh]

Eugenio - 12-31-2008 at 11:21 AM

Clinton was the 90's and Bush was in favor of immigration reform - he had to delay things because of 911 (increased nationalistic sentiment in the US) but in the end misread and botched things anyway.

As far as peso valuation - in spite of governmental attempts to manipulate curency valuation it's really driven by where people want to park their money. Citizens and investors. Mexico is currently exposed to a quadruple whammy - practically all it's tradional sources of foreign income are down: oil prices, remittances, tourism, foreign investment in industry. In addition reduced proven oil reserves, Mexico's inability to develop proven reserves, and the cartel war makes the future kind of cloudy.

And without oil it's unlikely the foreign investors will bailout Mexico in the future. I doubt that Obama will step in - unless it's somehow in the US interest - hopefully he'll let the system fall under it's own weight - imo.

But supposedly the foreign exchange wizards have already factored all these things into their equations - so I wouldn't be betting one way or the other with regard to peso valuation. They're wrong a lot - but nobody ever knows which way they're wrong.

In other words - who the L knows where the peso will be tomorrow.

Take your money to Vegas and have fun with it.

Bajahowodd - 12-31-2008 at 11:41 AM

Just like you saw with commodities, a great deal of the fluctuation in currency is the direct result of speculative trading. I have a relative who is a foreign currency trader at J. P. Morgan. So much of it is trying to profit by speculation. Does anyone really believe that oil was truly worth $146 a barrel jjust because of consumer demand? If was all about GDP, foreign trade and such, how could the Pound be the strongest currency in the world? what does the UK have?

Woooosh - 12-31-2008 at 11:48 AM

Quote:
Originally posted by Bajahowodd
Just like you saw with commodities, a great deal of the fluctuation in currency is the direct result of speculative trading. I have a relative who is a foreign currency trader at J. P. Morgan. So much of it is trying to profit by speculation. Does anyone really believe that oil was truly worth $146 a barrel jjust because of consumer demand? If was all about GDP, foreign trade and such, how could the Pound be the strongest currency in the world? what does the UK have?


1 GB pound is worth less than 1.04 euro today- hardly strong.

Bruce R Leech - 12-31-2008 at 11:49 AM

Mexico's economy is in the dump and going down fast. they are printing Pesos at a rate that boggles the mind to try to hold it up. you just don't here about it on the news because in Mexico they keep everything a secret.

Bajahowodd - 12-31-2008 at 11:52 AM

Woooosh- Sure, the pound isn't as strong as it was, but I still can't see it being anything close to the Euro. But it is.

Skeet/Loreto - 12-31-2008 at 12:34 PM

I was looking through my old Peso Paper money the other Day.
Still have several 100,000 Notes.
I stayed and played the Peso when it was 8 to One and went to 3,245 to One. Made some real good money on those 28 Day Notes you buy at the Banks.

Don't believe for an Instant that Pres.Elect Obama will have any affect on Mexico when he becomes president. Will not happen, just look at Mexico's past and the pace the people move.

I certainly do not want it to take the Course of the "You Know" Generation" here in the states.

wilderone - 12-31-2008 at 12:37 PM

"...you just don't here about it on the news because in Mexico they keep everything a secret."
Well, I'm glad they told you all about it, Bruce!

" Does anyone really believe that oil was truly worth $146 a barrel jjust because of consumer demand?"
Tell me if I'm in left field -- I think the eastern powers that be were warning the USA with their power vis a vis oil prices and the related disaster that could befall the USA if they chose to exercise their full power. Who knows what lies beneath the tip of the iceburg.

Woooosh - 12-31-2008 at 12:43 PM

So how can the world economy ever "recover" if every single economic aspect is determined not on true value- but on specualtion?

Bajahowodd - 12-31-2008 at 12:45 PM

Good point. Let's not forget the close ties between the Bush family and the Saudi royals.

Bajahowodd - 12-31-2008 at 12:57 PM

Maybe we should burn down the business schools. Their mantra has been that you have to keep increasing profits, increasing growth. What's wrong with some lowered expectations and slower growth? Oh, that's right. People who do nothing but trade and speculate might have to get real jobs.

Woooosh - 12-31-2008 at 01:09 PM

We're already seeing that resistance to change.

Clearly the Wall Street business model is a failure- yet the $700B bailout is being used to reinforce the existing failed systems and management structures... still awarding huge bonuses to "retain" talent, but now with OUR tax money. I haven't seen a culture change from anyone begging for the Tax bailouts. Some talk- but no change. They take the money, fill their own pockets and walk on with no shame. There is no pressure to change-except for lettingg them fail and their stock warrant to become valueless. Which- givein their abuse of the bailout funds released to date- should be the future model. Excpet that that kills everyones 401K funds- becasue everyone these days has index funds.

NONE of this did anything to help the root of the original "problem" - main street foreclusres. The USA could have bought up ALL the troubled foreclosure notes for around $7Billion. In hindsight- that would have been the better move. Everyone else just used the risk of foreclosures as an excuse to explain why their pyramid schemes collapsed. So what did the gov't do?.., it rebuilt the pyramid for them.

[Edited on 12-31-2008 by Woooosh]

Bajahowodd - 12-31-2008 at 01:18 PM

What's wrong with a no-down, interest-only loan to buy a $500,000 fixer-upper? Maybe I'm a bit too conservative financially, but I sold my house after Bush started the Iraq war and cut taxes to the rich. I just expected the result to have hit sooner. on the other hand, I'm sure Bush wishes it took a little longer.

bajabif - 12-31-2008 at 01:47 PM

Another call to sing songs and light candles! This will solve all problems including peso devaluation. Baja Hippie Nomads, we can duuuuu it. Si se puede. Or maybe we can all "hope" a whole bunch and things will "change". How bout running around nude in the streets and taking drugs? Remember how much that "helped" America in the sixties?

[Edited on 12-31-2008 by bajabif]

Skeet/Loreto - 12-31-2008 at 03:09 PM

There are many "What Ifs" tied to the Economy of the US.
To Blame the President is just an Excuse.

The uncontrolled spending and borrowing of Money caused this so-called slow down.
Be careful my Amigos for the next 2 to 3 years it is going to get very Painful for those who have to live off of High Producers when many are not buying.
Watch what happens to China in the next few Months. Mexico and its peso will stay fairly even as it is so closly regulated to the States and the Dollar.

Figure on what you can do when it gets Worse and you can lose your Job.


Be ready to tighten up and move to find work and lower your expenses.
Do not bet on the Peso!

.

Oso - 12-31-2008 at 04:21 PM

Peso drops on consumer confidence

BY VALERIE ROTA

Bloomberg News

The peso fell, reversing an earlier gain, after a U.S. report showed consumer confidence fell to a record low, indicating spending may keep weakening.

The Mexican currency declined for a fourth day, its longest losing streak in more than two months. The peso has fallen 21 percent this year, heading for its biggest yearly decline in more than a decade as the United States, the biggest buyer of Mexican exports, faces the most severe financial crisis since the Great Depression.

"The consumer confidence number was really bad," said Omar Martin del Campo, a currency trader at Banco Ve Por Mas in Mexico City. Trading in the peso was slower than normal before the New Year's Day holiday, he said.

The peso fell 0.2 percent to 13.7613 per U.S. dollar at 5 p.m. New York time, from 13.7387 yesterday. It earlier touched 13.8785, the weakest since Nov. 24. The Mexican currency has lost 2.2 percent this month, the second-biggest decliner against the dollar among the world's major currencie.

The U.S. Conference Board's index of consumer confidence fell to 38 in December, the lowest level since records began in 1967, from 44.7 in November, the group said. Consumer spending accounts for 70 percent of the United States economy, which buys about 80 percent of Mexican goods sold abroad.

The peso earlier rose amid gains in stocks in the United States, Europe and Asia, after the United States Treasury pledged $6 billion to support GMAC LLC, the financing arm of General Motors Corp., in an effort to keep the largest U.S. automaker out of bankruptcy.

Yields on Mexico's benchmark security dropped four basis points, or 0.04 percentage point, to 8.28 percent, according to key dealer Banco Santander.