Chile Peso 2017, starts at 665.29

Chile Investment, how to invest in Chile, what to watch out for when investing, economic issues, currency exchange in Chile, and more.
john
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Re: Chile Peso 2017, starts at 665.29

Postby john » Tue Jan 10, 2017 3:36 pm

at46 wrote:
john wrote:My comments were related to the CLP exchange rate. The data does not support any strong correlation between stock returns and exchange rates.

http://voxeu.org/article/stock-and-currency-returns

Isn't it all about the copper price? Correlation of 0.93 with the peso rate. Also, what about the currency swap with China that moved 10% of Chile/China trade off of the US dollar? China is making a lot of those swap deals around the world that are totally not pro-dollar. Who knows how that's gonna play out? The only thing the US can counter that with is by continuing to blow up regions of the world, now that vampire squidding on the faces of Europe/Japan and a bunch of others is getting harder.


Good points! Yes, the price of copper has historically been a strong correlating factor with the value of the CLP. However, based on continued low economic growth rate projections for industrialized economies, there doesn't seem to be much upside potential for copper prices to rise over the next couple of years. In my opinion, the magnitude of the Chinese currency swap deals you referenced won't be much of a mitigating factor on the exchange rate value of the US dollar...at least not in the next few years. Moreover, disproportionate US ownership of world financial assets suggests continued US dominance in world financial markets.
One must care about a world one will not see.
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at46
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Re: Chile Peso 2017, starts at 665.29

Postby at46 » Tue Jan 10, 2017 4:38 pm

john wrote:However, based on continued low economic growth rate projections for industrialized economies, there doesn't seem to be much upside potential for copper prices to rise over the next couple of years.

Regular car uses 2-4 kg of copper, an electrical car uses 18-25. Copper consumption per head is several times higher in industrial economies vs. China. World population is projected to grow by something like 20% by 2035. Have there been any major copper discoveries recently anywhere in the world? If anything, it's getting harder to extract I think. So I don't see anything wrong with copper fundamentally mid- and long-term. But election related volatility and post-election uncertainty will certainly boost the hair dye market for the graying manes.

john wrote:In my opinion, the magnitude of the Chinese currency swap deals you referenced won't be much of a mitigating factor on the exchange rate value of the US dollar...at least not in the next few years.

I think it's already happening. Now all eyes are on Trump and his opening moves.

john wrote: Moreover, disproportionate US ownership of world financial assets suggests continued US dominance in world financial markets.

Those chips are getting real hard to cash out. Do you see any of the Chilean oligarchs selling their cash cows? Same thing all around the world.

john
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Re: Chile Peso 2017, starts at 665.29

Postby john » Tue Jan 10, 2017 5:46 pm

at46 wrote:
john wrote:However, based on continued low economic growth rate projections for industrialized economies, there doesn't seem to be much upside potential for copper prices to rise over the next couple of years.

Regular car uses 2-4 kg of copper, an electrical car uses 18-25. Copper consumption per head is several times higher in industrial economies vs. China. World population is projected to grow by something like 20% by 2035. Have there been any major copper discoveries recently anywhere in the world? If anything, it's getting harder to extract I think. So I don't see anything wrong with copper fundamentally mid- and long-term. But election related volatility and post-election uncertainty will certainly boost the hair dye market for the graying manes.

john wrote:In my opinion, the magnitude of the Chinese currency swap deals you referenced won't be much of a mitigating factor on the exchange rate value of the US dollar...at least not in the next few years.

I think it's already happening. Now all eyes are on Trump and his opening moves.

john wrote: Moreover, disproportionate US ownership of world financial assets suggests continued US dominance in world financial markets.

Those chips are getting real hard to cash out. Do you see any of the Chilean oligarchs selling their cash cows? Same thing all around the world.


My timeframe prediction was over the next two years. Moreover, further Chilean industry diversification should result in a smaller percentage of GDP coming from copper exports in the future, thereby diminishing the correlation to the CLP.

Again, since my time horizon caveat is over the next few years, I don't think Trump's "opening moves" will have much effect on China swap deal arrangements in the near term.

My understanding is that most of the big Chilean companies are publicly traded and that many of the oligarchs' cash cows are in that category...that would imply they are not invulnerable to potential foreign ownership.

Chile -- Openness to and Restriction on Foreign Investment
https://www.export.gov/article?id=Chile ... investment
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--- Bertrand Russell

at46
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Re: Chile Peso 2017, starts at 665.29

Postby at46 » Tue Jan 10, 2017 6:10 pm

john wrote: Moreover, disproportionate US ownership of world financial assets suggests continued US dominance in world financial markets.

Those chips are getting real hard to cash out. Do you see any of the Chilean oligarchs selling their cash cows? Same thing all around the world.
john wrote:My understanding is that most of the big Chilean companies are publicly traded and that many of the oligarchs' cash cows are in that category...that would imply they are not invulnerable to potential foreign ownership.

Wow, just wow. Well, enjoy whatever you're on.

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Re: Chile Peso 2017, starts at 665.29

Postby admin » Wed Jan 11, 2017 9:30 am

at46 wrote:
john wrote: Moreover, disproportionate US ownership of world financial assets suggests continued US dominance in world financial markets.

Those chips are getting real hard to cash out. Do you see any of the Chilean oligarchs selling their cash cows? Same thing all around the world.
john wrote:My understanding is that most of the big Chilean companies are publicly traded and that many of the oligarchs' cash cows are in that category...that would imply they are not invulnerable to potential foreign ownership.

Wow, just wow. Well, enjoy whatever you're on.


yea, I am not sure what that even means.
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gregf
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Re: Chile Peso 2017, starts at 665.29

Postby gregf » Wed Jan 11, 2017 10:21 am

at46 wrote:Regular car uses 2-4 kg of copper, an electrical car uses 18-25. Copper consumption per head is several times higher in industrial economies vs. China. World population is projected to grow by something like 20% by 2035. Have there been any major copper discoveries recently anywhere in the world? If anything, it's getting harder to extract I think. So I don't see anything wrong with copper fundamentally mid- and long-term. But election related volatility and post-election uncertainty will certainly boost the hair dye market for the graying manes.


But car sale are decreasing are they not? All the hoo-hah I read lately is how self driving cars and Uber/Lyft will mean lower car ownership. Already they talk about who millenials dont care about buying a car/don't even want to own one. Of course, this is the USA being discussed not the wider world.

We are considering moving back to the USA this or next year - two small kids sort of changing priorities - but I'm wondering if I want to do that lately. The Dollar is strong (I earn in dollars), our almost 100% coverage health plan is $600 a month (bronze self-employee family rates are like $1400+ monthly, plus a huge deductible to eat through of $12,000+ each year), and we have a financial history here that we won't have in the USA...

The dollar really has me hesitant about everything though. That and the high real estate prices. I'm paranoid of buying and moving into a house and then in 2 years losing my ass on it - either through prices falling or the Dollar tanking.

Gah. Expat problems.

at46
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Re: Chile Peso 2017, starts at 665.29

Postby at46 » Wed Jan 11, 2017 4:30 pm

at46 wrote:Regular car uses 2-4 kg of copper, an electrical car uses 18-25. Copper consumption per head is several times higher in industrial economies vs. China. World population is projected to grow by something like 20% by 2035. Have there been any major copper discoveries recently anywhere in the world? If anything, it's getting harder to extract I think. So I don't see anything wrong with copper fundamentally mid- and long-term. But election related volatility and post-election uncertainty will certainly boost the hair dye market for the graying manes.


gregf wrote:But car sale are decreasing are they not?


Like, vs. truck sales? Yeah, cheap gas does that to cars :) Seriously, though, global sales are up 5 million on last year, at 76.74 million, and are forecast to reach 100 million per year by 2020, with 7% of that being electric (https://www.statista.com/statistics/200 ... ince-1990/

BTW, I was totally wrong on the amount of copper used in cars. It's actually a lot more: about 23 kg per regular car and 69 kg per electric. For electric trolleys and buses it's just over one ton per piece. That's gorgeous music to someone invested in Chile :) http://www.coppermatters.org/copper-pow ... tric-cars/

gregf wrote:The dollar really has me hesitant about everything though. That and the high real estate prices. I'm paranoid of buying and moving into a house and then in 2 years losing my ass on it - either through prices falling or the Dollar tanking.


We're at historical highs for USD/CLP. http://www.xe.com/currencycharts/?from= ... P&view=10Y My bet is that CLP is going to strengthen against USD over a year or two, global cataclisms notwithstanding. So maybe look at small liquid apartments instead of a less liquid house since apartments are more resistant to price weakness. You might get 10-20K USD more per apartment in 1-2 years just due to CLP strengthening from 670 today to, say, 570, which I think is quite realistic. Plus there might be appreciation potential for good picks.

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Re: Chile Peso 2017, starts at 665.29

Postby gregf » Wed Jan 11, 2017 7:48 pm

I've been in chile since Oct 2008, and remember very well how much $450-$480 CLP exchange rates sucked! Though this sustained 600+ rate now has been chugging for awhile, and I'm starting to wonder if 600 might be a safe number to plan on for the next 1-2 years...

Interesting info on house vs apartment buying here. We won't buy til the end of the year, if we do, if we are going to stay long term. Does no one think prices will come down significantly in near future? In the span of 3-4 years from like 2011-2014 prices pretty much doubled. Rents have come down a bit in the last 12 months. Prices seem to have come down a tiny bit on buying too.

john
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Re: Chile Peso 2017, starts at 665.29

Postby john » Wed Jan 11, 2017 9:45 pm

at46 wrote:
...My bet is that CLP is going to strengthen against USD over a year or two, global cataclisms notwithstanding. So maybe look at small liquid apartments instead of a less liquid house since apartments are more resistant to price weakness.


A building is not a liquid asset. A liquid apartment is one with a plumbing problem. :wink:
One must care about a world one will not see.
--- Bertrand Russell

at46
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Re: Chile Peso 2017, starts at 665.29

Postby at46 » Wed Jan 11, 2017 10:03 pm

gregf wrote:I've been in chile since Oct 2008, and remember very well how much $450-$480 CLP exchange rates sucked! Though this sustained 600+ rate now has been chugging for awhile, and I'm starting to wonder if 600 might be a safe number to plan on for the next 1-2 years...

Interesting info on house vs apartment buying here. We won't buy til the end of the year, if we do, if we are going to stay long term. Does no one think prices will come down significantly in near future? In the span of 3-4 years from like 2011-2014 prices pretty much doubled. Rents have come down a bit in the last 12 months. Prices seem to have come down a tiny bit on buying too.

I've counted ten cranes from my balcony in Concón today. And it looks like there's gonna more here soon coz they've just fenced off three new construction sites. The returnees from California are ecstatic to see prices five times cheaper here for comparable apartments. I just keep my fingers firmly crossed :)

at46
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Re: Chile Peso 2017, starts at 665.29

Postby at46 » Wed Jan 11, 2017 10:05 pm

john wrote:
at46 wrote:
...My bet is that CLP is going to strengthen against USD over a year or two, global cataclisms notwithstanding. So maybe look at small liquid apartments instead of a less liquid house since apartments are more resistant to price weakness.


A building is not a liquid asset. A liquid apartment is one with a plumbing problem. :wink:

I won't believe it till you provide a link to a government website :)

john
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Re: Chile Peso 2017, starts at 665.29

Postby john » Wed Jan 11, 2017 10:33 pm

at46 wrote:
john wrote:
at46 wrote:
...My bet is that CLP is going to strengthen against USD over a year or two, global cataclisms notwithstanding. So maybe look at small liquid apartments instead of a less liquid house since apartments are more resistant to price weakness.


A building is not a liquid asset. A liquid apartment is one with a plumbing problem. :wink:

I won't believe it till you provide a link to a government website :)


Will a photo of a leaky government building do? :wink:
One must care about a world one will not see.
--- Bertrand Russell


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