The Dollar Weakens Against Foreign Currency – A Look at US Exporting Industries

The dollar reached a record low against the 13 nation Euro in trading Monday. Greenspan, while out promoting his new book, and economic experts have expressed worry over both recession and/or runaway inflation. Also, if you haven’t seen Jim Cramer’s Fed-Rate meltdown from earlier this month on youtube, it is an entertaining (if not somewhat disturbing) commentary on the US prime rate. (cramer)

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As the dollar declines against foreign currencies, it historically has decreased foreign manufacturer’s price competitiveness in the US and increased US manufacturer’s price competitiveness overseas.

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Or as Holgar Schmieding, Bank of America’s chief European economist, put it, “A stronger exchange rate dampens the growth of net [European] exports but augments domestic [European] demand by making imports cheaper.”

According to the Census Bureau’s 2006 annual report, the top US export industries were transportation equipment, computer & electronic products and chemicals.

There is also news today of a United Auto Workers strike. Because negotiators reached a settlement on the most difficult portion of the negotiations between GM and the UAW, experts had reported a strike unlikely. However, there were also AP reports this morning of workers picketing outside GM plants. This might be something to keep in mind when viewing the trades listed below.

Looking at this news from an option trading perspective:
Will the weaker US dollar mean stronger profits and sales in the industries mentioned? It is not likely the faltering dollar will solely have this effect, but it may be a competitive advantage.

Below is a list of the industries we included in the Poweroptions SmartSearchXL search as they correspond to the industry from the US census report.

Auto Manufacturers – Major, Trucks and Other Vehicles, and Boeing (BA) = Transportation

Chemicals – Major Diversified = Chemicals

Personal Computers = Computer & Electronic Products

The scope of the US census industry definition goes beyond the equivalent industries we used in the search.

Potential Trades:
All of the following option trades have 54 days until expiration.

Covered Call Search – Exporting Companies
Symbol Stock
Price
OPTION Strike
Info
Option
Bid
Net
Debit
%
Dnsd.
Prot.
%
If
Unch.
%
If
Asgnd
GM 35.44 (+0.50) GMKH 07 NOV 40.0 (54) $1.25 34.19 3.5 3.7 17
GM 35.44 (+0.50) GMKU 07 NOV 37.5 (54) $2.10 33.34 5.9 6.3 12.5
AAPL 148.80 (+4.65) APVKL 07 NOV 160.0 (54) 5.9 142.9 4 4.1 12
GM 35.44 (+0.50) GMJU 07 OCT 37.5 (26) $1.50 33.94 4.2 4.4 10.5
PCAR 89.19 (-0.78) PAQKS 07 NOV 95.0 (54) 2.85 86.34 3.2 3.3 10
AAPL 148.80 (+4.65) APVKK 07 NOV 155.0 (54) 7.6 141.2 5.1 5.4 9.8
GM 35.44 (+0.50) GMKG 07 NOV 35.0 (54) $3.20 32.24 9 8.6 8.6
FRPT 18.75 (+1.03) QFZKW 07 NOV 17.5 (54) 2.6 16.15 13.9 8.4 8.4
OSK 57.50 (+1.61) OSKKL 07 NOV 60.0 (54) 2.05 55.45 3.6 3.7 8.2
AAPL 148.80 (+4.65) APVKJ 07 NOV 150.0 (54) 9.7 139.1 6.5 7 7.8
APD 93.62 (-0.14) APDKS 07 NOV 95.0 (54) $2.95 90.67 3.2 3.3 4.8
DD 49.91 (+0.22) DDKJ 07 NOV 50.0 (54) $1.75 48.16 3.5 3.6 3.8
DELL 28.15 (+0.39) DLQKY 07 NOV 27.5 (54) 1.65 26.5 5.9 3.8 3.8
ROH 55.79 (-0.57) ROHKK 07 NOV 55.0 (54) $2.75 53.04 4.9 3.7 3.7
PX 81.82 (+1.11) PXKP 07 NOV 80.0 (54) $4.40 77.42 5.4 3.3 3.3
BA 103.00 (+0.41) BAKT 07 NOV 100.0 (54) 6 97 5.8 3.1 3.1
(For more details click the ticker symbol above)

Competitors:
Competitors for GM include: Ford Motor Co. (F), Toyota Motor Corp. (TM), Chrysler LLC (private), Daimlerchrysler AG (DAI), Genuine Parts Co. (GPC), Honda Motor Co. Ltd. ADR (HMC), Nissan Motors AD (NSANY), and Tata Motors Ltd. (TTM).
Competitors for AAPL include: Dell Inc. (DELL), Hewlett-Packard Co. (HPQ), Microsoft Corporation (MSFT), Adobe Systems Inc. (ADBE), Avid Technology Inc. (AVID), Creative Technology Limited (CREAF), DivX Inc. (DIVX), Napster Inc. (NAPS), RealNetworks Inc. (RNWK), and Sonic Solutions (SNIC).
Competitors for PCAR include: Daimlerchrysler AG (DAI), and Volvo AB (VOLV).
Competitors for FRPT include: Textron Inc. (TXT), BAE Systems Land and Armaments (private), and General Dynamics Land Systems Inc. (private).
Competitors for OSK include: Federal Signal Corp. (FSS), AM General, LLC (private), and BAE Systems Land and Armaments (private).
Competitors for APD include: Praxair Inc. (PX), Airgas Inc. (ARG), ATMI Inc. (ATMI), and Cabot Microelectronics (CCMP).
Competitors for DD include: Bayer AG (BAY), Dow Chemical Co. (DOW), ATMI Inc. (ATMI), Cytec Industries Inc. (CYT), FMC Corp. (FMC), Huntsman Corp. (HUN), Metabolix Inc. (MBLX), 3M Co. (MMM), Occidental Petroleum Corp. (OXY), Rohm and Haas Co. (ROH), and Tronox Inc. (TRX).
Competitors for DELL include: Hewlett-Packard Co. (HPQ), International Business Machines Corp. (IBM), Acer Inc. (private), Apple Computer Inc. (AAPL), Best Buy Co. Inc. (BBY), Circuit City Stores Inc. (CC), Gateway 2000 Inc. (GTW), Insight Enterprises Inc. (NSIT), Neoware Systems Inc. (NWRE), Rackable Systems Inc. (RACK), SuperMicro Computer Inc. (SMCI), and Systemax Inc. (SYX).
Competitors for ROH include: Dow Chemical Co. (DOW), EI DuPont de Nemours & Co. (DD), Compass Minerals Intl. Inc. (CMP), and II VI Inc. (IIVI).
Competitors for PX include: Air Products & Chemicals Inc. (APD), and NuCo2 Inc. (NUCO).
Competitors for BA include: Lockheed Martin Corporation (LMT), Northrop Grumman Corp. (NOC), Airbus S.A.S. (private), Applied Signal Tech. Inc. (APSG), Orbital Sciences Corp. (ORB), Raytheon Co. (RTN), and United Techs. Corp. (UTX).
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