People predicted dire consequences for the dollar during the height of the recession, most of which never materialized. Then again, history has taught us several times not to underestimate the incredible strength and resilience of the US economy.
Over the past two years the A�/$ rate has varied from $1.24 – $1.59, with an average of $1.41. It is now $1.27, more or less the same as it was in Oct-Nov 2009 and in Feb-March 2010.
Despite the unpredictability of all this, our feeling is that the euro will continue to weaken against the dollar for some time. ItA�s difficult to think about how this can be used to your advantage in the abstract so letA�s use a Mosaic property costing $75,000, which is priced 65% lower than its peak.
Three months ago it would have cost you A�55,000 to purchase $75,000. Now it would cost A�59,000. It’s tempting to think that you’ve missed the boat as the price has “gone up” by A�4,000 and/or that youA�re not getting a 65% discount anymore. Both are misleading.
Look at it the other way. You pay the A�59,000 and in a few months time the US/EU exchange rate moves from $1.27 to $1.17 (very possible). If you convert your $75,000 back to euro youA�ll get A�64,000. Have you lost A�4000 or gained A�5000,
Put your money to work
ThereA�s also the rental income you can earn (good luck getting 10% in an EU country from a A�60,000 property), the capital appreciation potential (prices have still plenty of room to fall in most EU countries) and above all, the fact that your money is working hard in an appreciating asset in a recovering economy rather than languishing in a bank in a slow economy generating 1-2% interest. Isn’t it better to read positive news about the US economy when you have assets there,
Florida property provides a lower cost asset, at a higher yield and significantly better capital appreciation potential than anything comparable in Europe.
More importantly, it is vital that investors start thinking about diversifying away from euro assets and into income generating assets in other currencies. You do not want to have all your money in euros when the US market is thriving and the euro currency outlook is weak and uncertain due to rogue member states.