Managing Currencies All Over the World
FIREapps Chairman Wolfgang Koester on the fate of the euro.
- Duration 5:40
- Date Jan 19, 2012
FIREapps Chairman Wolfgang Koester on the fate of the euro.
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If you think.
Just simply selling -- products is a business's main issue imagine this a major accompanying like say IBM -- Intel does business in some four.
Hundred countries which means that on any given -- they have to worry about how hundreds of foreign currencies.
Might be moving against the dollar.
That's called a nightmare unless you're paying my next -- to manage all that currency risk of Wolfgang -- the coaster is chairman of fire -- he's with us now from Phoenix in a Fox Business exclusive.
To tell us what companies like Pfizer and Google pay him a lot to figure out.
Which I guess at the moment really Wolfgang is where's the Euro going because 18% of S&P 500 companies are doing business.
18% of their business is done in the eurozone so where first off is the Euro really -- Well I the long term answer that is the way.
-- -- -- And quite frankly and I think we talked about this.
You know right about eighteen to the months to two years ago at that time the question was is no Euro gonna be able lose survived the Greek debt crisis as it's coming -- -- -- But quite frankly.
That opportunity is passed and governments central banks -- -- are preparing for.
The what I consider the inevitable -- a concerted effort to proper -- he.
Go back to the individual currencies possibly -- some of those currencies against the U against German deutschemark again.
But that presents a -- a significant problem for corporations.
-- happy hero in my hand are you telling me that this is going to be broken up.
And what does that mean for companies and how do they protect themselves how -- they plan around the sort of the with -- real word is hedge what are you telling them to do.
Bald the fundamental part of it is really understand their exposure -- I'm in its history it's as you open this up with it's not easy to understand.
What you're exposures are and you got to look at it from a balance -- point commander -- -- -- -- half -- point of -- The beauty of it is not so I must say that is.
Fire -- is in the business of helping companies by -- technology.
To understand that at the push of a button so it is available today.
This complex issue that you can pull the right data out and look at it the way you want to look at it.
Now with respect to the Euro what you want to do is look at two things one is.
What is the eurozone mean as you already pounded out on average 18% of companies have their revenues from there -- 18% of their Dakota yet that's likely to happen yet.
Is it is we looked at.
What are those exposures against the Euro that's number one.
And really understand that well to a 99% confidence level quite frankly and then secondly and equally importantly is then try to understand his.
What is it.
With -- what would it look like with the individual currencies again.
-- -- Europe -- and that's both very doable today let.
-- bring it back to the investor and brought it from this here discussion because there is of course that the Vietnamese Dong and there is the rouble from Russia there's the rupiah from India.
There's a long that you want you name it that's out there that all have to figure out these double plays of how the dollar plays against it for companies that many people -- don't whether to McDonald's.
Or an IBM.
When I adds an investor or shareholder and looking at what an balance sheet annual shareholder.
What is the number one thing -- look at to see if a company is managing this this currency risk properly.
Yeah I would look at three areas one I would look at the income statement look at.
Is there volatility in a line called the foreign exchange in a -- line that's only part of it.
Second part is I would look at the quarterly earnings report quarterly reports and -- reports.
Where they have items three and seven -- in the 10-Q and ten K respectively.
Actually discussing that.
But then very importantly as well is listen to move in these earnings calls -- of the majority of analysts asked of the CEO and CFO.
To comment on currencies if it has been an impact.
How is the CEO and CFO.
Articulating the risk that he's willing to take -- -- -- that he -- she is not willing to take and that's really important so.
Quite frankly we do a lot of research when we -- people are corporations.
Houses CEO and CFO relating to this and what the volatility if it becomes very analogous showing more -- earnings.
Exactly that remember folks that if the dollar is stronger than currency XY or C that makes our products more expensive to foreigners.
And if the dollar gets weaker or their currency strengthens that's great for multinationals.
Is there a company that that is as you could I guess call it currency agnostic.
-- there certainly are companies and not.
I'm sorry I would probably mostly -- our customers because they.
Where we are -- -- technology that halts and that's so yes there are other companies like the -- -- and Merck you're talking about they will they're very sophisticated about this.
Customers like defies are very sophisticated makes cents -- -- -- it.
But then you have companies.
Like does IBM who have not -- and done that well added I think they're trying.
But under the previous CEO that wasn't a top five pro -- maybe under the New Zealand will be but.
Last quarter I believe that over 500 million dollar hit to their top line.
I estimate that to be 200 million dollars this quarter -- that's currency related.
Currency related that's purely.
The dollar went up and therefore there were the euros that I received from and brought back into the United States will worth less.
Interest thinks so and IBM's coming out with earnings so -- this is this is the new CEO's first opportunity to show that she can manage that we will be watching that you have.
Educated us Wolfgang thank you very much about but we appreciated the eagle tank Coastr.