The $ vs. the € & £ and their effect on Port buying strategy

[Roy Hersh]

Given that the US economy is in the toilet, with banks having failed and Wall St. on the grandest roller coaster of our lifetime, does it amaze you to see how the valuation of the dollar has risen versus the Euro and Pound? It baffles me, although obviously the economies in the UK and the rest of the EU as well must be pretty bad too.

This shows the "strength" of the USD since August: http://finance.yahoo.com/q/bc?s=USDEUR=X&t=3m

I am not so sure the use of the word strength is accurate, because it may just be the comparative weaknesses of the other currencies. So, buy gold ... or do you prefer to have liquid assets from the River of Gold, otherwise known as the Douro River?

Is now a good time to be buying or are you going to wait to see if prices are going to drop even more towards the holidays or thereafter? What is your current buying strategy?

If you want a great currency converter that shows all of the currencies at-a-glance, I always use http://www.xe.com as it is a fantastic tool to have handy.

[Andy Velebil]

I don't think the dollar is really stronger, but more that other economys were over inflated and now there is a correction happening...buts thats another topic. As for my buying, I will most likely take advantage of the weakening currency abroad and at the poor economy at home to buy some stuff. I really hadn't planned on it, but one must take advantage of good buying opportunites when they arise

[David Spriggs]

I believe that the dollar is getting stronger because other countries are looking like they are going to have to lower interest rates. Also, there is fear that other countries economies are not as strong as they initially appeared. Look at what happened to Iceland. There is fear that there is more of that to come. People are (surprisingly) seeing the US as a safe haven, thus they are buying up US Treasury bonds. Also, much lower energy prices is better for the US economy than others (I hate to say that).

I like cash these days - not gold or wine. I'm still buying some wines, but mostly at auction. I'm passing on the vast majority of wine mailing lists I have been on -- actually I started passing on many about 2 years ago. I think prices have only just begun to drop... and haven't really dropped much yet. I'm waiting until at least next Spring to see how things look.

Since I work for Yahoo! I'll give a plug for our finance/currency site - http://finance.yahoo.com/currency

[Andy Velebil]

So Dave that means you "Yahoo?"

Seriously though, I too have passed on all mailing lists a long time ago. With prices going sky high here in California and their requirements to buy certain other bottles I didn't want to get the ones I did really turned me off. But what is interesting is a recent email from an auction house that mentioned to poor economies and the slighty lower reserve prices for some of the wines. It was an interesting email to read and very subtly they really were trying to politely address the issue, explain the lower prices, and at the same time trying to encourage people to place bids becuase of the better deals.

I know Tom has mentioned that UK auctions have taken a major hit recently. So far the same hasn't happened to the US, yet! But the last big auctions here in the US were just before the major issues really hit internationally. So I am curious to see what happens the next few months with upcoming auctions here.

I also was told that a major weekly auction house has seen a major reduction in the number of bids in the past few weeks. I personally don't think there will be a crash of prices, but there will be a reduction of sorts. Wine prices, and Port inparticular, really went up quick the past few years and i think now will be a correction to a certain extent.

[Glenn E.]

The European econonmies are in worse condition than the US... they just don't know it yet. The reason that they're worse off is that they've been practicing the same foolish credit stratigies, yet they lack clear central control over the result. There really is no EU equivalent of the Federal Reserve Bank, Bernard Bernanke, and the Department of the Treasury. There are equivalents in each individual country, but that's precisely my point. Worse, the unified currency hurts in this circumstance because none of the member nations have any significant control over it, yet they're required to use it.

When the US economy was collapsing and we were busily trying to approve a $700B bailout, the EU countries were all smug and talked about how foolish it was to bail out our system that way. Now, many months later, they have collectively approved $2.3T (yes, TRILLION) in bailouts for their economies. Our bailout was significantly cheaper, and because of a much more centralized control system it will probably recover more quickly as well.

So relatively speaking, yes the dollar is once again growing stronger. It will be interesting to see where things eventually settle in 3-5 years.

[Derek T.]

Given that the US economy is in the toilet, with banks having failed and Wall St. on the grandest roller coaster of our lifetime, does it amaze you to see how the valuation of the dollar has risen versus the Euro and Pound? It baffles me, although obviously the economies in the UK and the rest of the EU as well must be pretty bad too.

Roy,

That final statement is a great demonstration of the insular nature of US media coverage. The UK economy has been on its knees for as long as this banking crisis has prevailed. The UK government nationalised one of our largest retail lending banks (Northern Rock) in February 2008 following a period of instability after it nearly collapsed in September 2007. Many other UK and EU institutions have been struggling to keep there head above water for more than a year now. From your comment above and a few things Andy mentioned to me when he was over here it is apparent that the US media simply don't report what is going on elsewhere in the world. Here is a good summary of the crisis in terms of how it affected the UK and EU markets: http://news.bbc.co.uk/1/hi/business/7521250.stm

So, it looks like we are all in this together. But everyone outside the USA seems to think it's all your fault!! :devil:

Derek

PS: I'm not sure Glenn is comparing apples with apples but I am not qualified to point out the flaws in his argument. What I would say is that the US $700B package seems to being reported here as a fund that may be used for bailouts. However, if you read the above link you will see that in the UK and EU the bailouts are actually hapening almost every day with governments handing over the cash to these financial giants in return for an equity share or total control of the company. Is that happending in the US?

[David Spriggs]

From your comment above and a few things Andy mentioned to me when he was over here it is apparent that the US media simply don't report what is going on elsewhere in the world.

That's exactly why I listen regularly to the BBC. There is no better single source for world news.

What I would say is that the US $700B package seems to being reported here as a fund that may be used for bailouts. However, if you read the above link you will see that in the UK and EU the bailouts are actually hapening almost every day with governments handing over the cash to these financial giants in return for an equity share or total control of the company. Is that happending in the US?

I don't know is any of the $700B has been handed over to any yet. There is currently lobbying going on to see who gets what. The fact that lobbying is involved doesn't give me a good feeling. My understanding is that the only huge bailout that is currently on going is "loans" to AIG to keep it afloat. Yes, the US government gets an 80% stake in AIG for that. They are planning to "invest" $250B in 9 big banks and get an equity stake - but even that's that's starting to look like it's falling apart. http://news.yahoo.com/s/ap/20081025/ap_ ... _bailout_2

[David Spriggs]

So Dave that means you "Yahoo?"

Of course I Yahoo! And I "bleed purple" too!
-Dave-

[Roy Hersh]

Derek,

I learned more about what was going on in the EU and UK when over there this year than anything we've had reported in the NYT/Washington Post or my local Seattle paper. We don't get good world news over here at all and it is a serious flaw. I guess if i was reading the Wall St. Journal it would be different, but I don't.

Our TV news is a manipulated mess whether it is left or right "driven" ... neither side portrays the full spectrum that will enable anyone here to get a clear picture, unless they watch both and BBC America which is solid.

Anyway, I was certainly aware of your banking issues there and England's gov't (progressive move) bailout put in place, which was great because it forced the Bush Admin to get off its ass and DO SOMETHING. We could not sit around and have our banks have the inability to trade with the UK/EU banks no less others around the world. I do blame the American gov't and when I say that, not only our pathetic excuse of a President ... but both the Democrats and Republicans in Congress who are supposed to represent the voice of the people.

They were warned about impending financial doom three years ago by our former Fed Chairman Greenspan and many others who testified before Congressional Hearings. That said, our sub-prime debacle, speaks to the greed in all of us. It may have started here, but Europe and other part of the world, quickly embraced this type of stacking of the "house of cards" and knew at some point the bubble would burst. It was inevitable and well documented. Like Michael Douglas said in the film, Wall St. > "Greed is good." Well banks and mortgage lending companies and Wall St. playing the derivates game, got us in deeper and deeper and greedy citizens took that bait and rode the rocket ship ... seemingly without any care as to when it would run out of fuel and plummet back to earth.

Money has started to get doled out to banks and AIG was only the first recipient. What is unbelievable to me is that the "fiscally conservative" ... "smaller government" ... "no deficit spending" ... Bush Admin and his party in general, have done everything possible to blow their core beliefs during the past 8 years. When history has a chance to reflect on this "regime" the legacy will be the opposite of Geo. Bush Sr. who was viewed as a centrist, with solid values and lots of smarts. Unfortunately, his son was a dolt and ruined the American standing in the world's view ... taking us down many a wrong path, with zero thought as to how to exit or at least turn around, not to mention unprecedented deficit spending that has helped to bankrupt the system and shipped more American jobs overseas than any other President who has ever presided over our government. When traveling overseas and speaking with friends in Europe, I am made to feel like an apologist for the way this government is viewed by people both left and right. Amazing.

Regardless of who is selected on Nov. 4th ... it is going to be a huge step up in quality, akin to Vintage Port going from 2002 to the 2003 harvest, to put this into a Port analogy. America is very ready for a new leader and although we all have our own favorites ... in reality, it could be Santa Claus running this country, as it would sure as heck be a better place than it has been for the past 8 years under "the dolt." Of course, there are still about 1/4 of the people in this country who STILL believe Bush has done a fabulous job in the past 8 years. But there you have it.

[David Spriggs]

Oh come on...don't hold back! Tell us what you really think! :twisted:

I have to agree with everything you've said. To me, one of the worst things to happen in the last 20 years is growth of partisan politics. Politicians seem to only care about their electability and their own party, but not the American people or the rest of the world. It's going to make recovering from this mess more difficult. If we can't get along and come up with some real compromises, then we'll be stuck in indecision.

Republican's will look back on the Bush (W) administration and see an opportunity completely squandered. I still don't know if the party will ever recover. It might split into two parties - one for the fiscally conservative side, and one for the far-right evangelical side. Who knows? I can already see signs of that in the current McCain/Palin ticket. As one Republican commentator said sadly - no party can expect to win national elections be alienating both coasts. The Republican's certainly have their work cut out for them.

On the Democratic side, I think that they need to be careful to not go on a witch hunt. I would like to see them start to work with the other side of the isle. I think that's what most American's want. But I fear that they will go and try to blame all this on the Republican Party... there will be hearings and indictments. Not that they don't deserve it, but in the mean time we have a real crisis here.

To get back to the subject... I am thinking about some more UK purchases. There are some deals out there. (I wish I had jumped on that 1994 Niepoort offer from Farr). The last shipment (arrived in August) I did from the UK were superb! Here were my comments about that shipment:

"I opened a 1970 Fonseca the day I picked up the ports. I will say that is maybe the best bottle of 1970 Fonseca I've ever had! Yes... maybe better than the one at Taylor (Vargellas).... it was certainly an equal to that one. The wine showed surprisingly young with almost no bricking on the rim. Also, last Thursday I needed to split up some of the cases. I split a case of 1983 Dow's and 1983 Graham's. Both the Dow's and Graham's are in awesome shape! No leakers at all. When I opened the 1983 Graham's, the cardboard looked all wrinkled like it had been through a flood. Perfect! I'm sure that this was stored in very damp cellar conditions for some time. I opened one of the 1983 Dow's that night. It was great, and also showed very young. The cork was the best old port cork I have seen in a long time. I was able to fully extract it with a simple corkscrew. Only the bottom third of the cork showed any staining. I would have bought another case if I had known they would be of this quality."

I've had both good quality and poor quality from the UK (mostly good)... but I believe that has to do with the merchants I used. I stick with the better ones now.

-Dave-

[Jay Powers]

It is amazing to me that we do not already have a viable third party here, composed of the more centrist parts of both republican and democratic parties. Leaving out the extremests on both sides of the gallery would result in a party that would win every election, and perhaps even result in a better economy and more port purchasing power for yours truely. :?

[Roy Hersh]

Jay,

That sounds close to perfection!

For whatever reason, the fringes in both parties would rather blame one another than stop the cross aisle bickering. Like the old joke, what is the opposite of progress? Congress! Someday the divisive politics and blathering talk radio extremists will have had their time in the spotlight and we'll get back to being a UNITED States of America. If it takes a 3rd party to make that happen (hopefully one far more centrist than we've had) great.

As to Port purchasing, the Euro is at $1.25 and the GBP is at $1.58 reaching levels I have not seen in five years for the Pound. Lots of opPORTunities coming down the pike. Stay at the ready.

[Eric Menchen]

Very well put in that long post Roy.

As for news, I've liked news.google.com for a while now because they sample from around the world. You get a different perspective when you read about something from the Times of India or a daily from SEAsia. Checking today though, it seems like the US sources are dominating. Maybe they've shifted balance, or maybe I just gravitate away from the local sources. I presume David can plug for the Yahoo equivalent.

-Eric

[Derek T.]

It is amazing to me that we do not already have a viable third party here, composed of the more centrist parts of both republican and democratic parties. Leaving out the extremests on both sides of the gallery would result in a party that would win every election, and perhaps even result in a better economy and more port purchasing power for yours truely. :?

Jay,

We have had a middle-ground political party here in the UK for as long as anyone can remember but they don't seem to serve much purpose other than to act as an opportunity for people to throw in the odd protest vote. They haven't come close to being elected. That said, perhaps they serve a purpose by ensuring that the other two parties remain relatively close to the centre and avoid the extremist nonsense we had in the second half of the 20th century.

For what it's worth, I'm in the Obama camp. The alternative seems to be a continuation of the ridiculous comic tradgedy that you have had for the past two terms. I know that a few on that side of the pond may still believe that "W" has been a good President but from the outside looking in the man is a buffoon with no credibility whatsoever. The thought of Palin being one heart attack away from having her finger on the big red button is too frightening to contemplate!!

Derek

[Roy Hersh]

Some major Republicans are starting to float over towards the Obama camp and backing him publicly. Four years ago, something like this could never have happened. It is amazing to watch how bringing Palin to the ticket, has caused the quick downward spiral of the McCain campaign. In retrospect, Tom Ridge would certainly have been less damaging. However at that time, the choice was made to appeal to the fringe far right and they are all very happy with Palin having been chosen. It is the Republicans who are far more centered, that are now becoming disenfranchised.

In Godfather 3, there is a scene where Andy Garcia's character is being introduced to Don Lucchesi by Don Altobello. Vincent "Corleone" Mancini says something like, "Money and Politics are two things I don't understand." Lucchesi puts his hand on Vincent's shoulder and mutters (closely paraphrasing), "Money is the ability to buy guns and politics is being able to pull the trigger."

I'll let you connect the dots.

The Euro continues to weaken.

[Moses Botbol]

McCain should've never made the economy a base issue as he is clueless about that subject matter in the depth needed to be convincing. The economy is obviously a big issue of the day, but he could've brought back the debate and discussions to imigration and tied that to the economy somehow.

Picking Palin shows his true lack of leadership and administration skills; especially when the economy is an issue and someone like Romney is waiting in the ranks for a tap on the shoulder. McCain has never been a good administrator and really lacks intellect to run the nation. His shoot from the hip decisions have all been poor from his early campaign squandering to Charles Keating. He has to do things at least twice to get a better result. A lack forethought and judgement is his impediment. For better or worse, George Bush actually has an advanced degree (Law Degree) and never crashed any planes. He did not squander his campaign finances either.

McCain should've kept the campaign, issues, and choices to arenas he was strong in. Debating Obama on legality and law was sheer stupidity. McCain threw away the election.

How does this play into my port buying strategy? Not much... I hope to see good deals this holiday season and even better deals early in the new year.

[Roy Hersh]

The LIBOR (London interbank offered rate) continues its two weak streak of declines and China lowered interest rates for an unprecedented 3rd time in 2 months. Closer to home, the Federal Reserve announced another 1/2 point reduction to 1% (along with the rate reduction of .5% on Oct. 8th by the Bank of England and the European Central Bank ... the day of our Cockburn's vertical ) for the interest rate and questions abound.

Will this stimulate the weakend US economy in time for retailers to see some normalization in time for the holidays?

Will there be a chance for anoter rate reduction at the Dec. 16th meeting of the Federal Open Market Committee (FOMC)? If so, possibly the lowest interest rate in over 50 years ... can this reel in inflation concerns?

Will the price of Port come down quickly?

[Glenn E.]

I'm hoping that interest rates stay low long enough for it to trickle down to home mortgages... I'd love to re-finance my home loan and get a better rate on another 30-yr fixed!

[Derek T.]

30-yr fixed!

Are you joking? We get 2-5 year fixed rates here in the UK. 30 years seems like too much of a gamble on both sides of the deal!

[Roy Hersh]

Here it actually takes nearly 30 years to pay off the darn loans. I can't believe the banks don't go out more than 5 years over there. Wow!