dwot (99.49)

How Did Investors Interpret Foreign Investment Earnings?

August 08, 2008 – Comments (2)

Reading various things on the markets there has been a lot of hype about investing in foreign markets.  When you consider the declining US dollar, well businesses that did business with other countries made a killing as their US price increased dramatically due to the weakening dollar.

I am not so sure investors completely understood where beating those earning expectations came from.  They've been reading foreign investments are the way to go and wow, look at the results.  But the big gain is a one shot deal, due to what happened with the dollar.

Going forward if the exchange rate remained constant the results would likely flatten right out.

The US dollar has gained strength.  This means that companies that benefited from that one shot increase are going to have a one shot decrease now.

If these investments have been priced to recent earnings or a mistaken believe that the growth was due to it being foreign markets and would continue, well, investors are going to be disappointed.