Saturday, December 29, 2007

Smaller local deals - way to go in 2008

I am not surprised after reading this. Going by the frenetic acquisitions in the Indian pharmaceuticals space, buyout fatigue is but natural. The strain on the resources of the acquirer post event is phenomenal. The integration of two distant, culturally disparate organizations taxes even the most competent management. You’ve miles to go before the intended benefits of the acquisition – global footprint, larger scale and added market share etc., are realized. Some estimates put the success rate of M&A deals during the last 5 years as low as just 18% globally.

But I think it’s far easier to integrate businesses in the same geographies. You can safely discount the cultural diversity element that rocks many deals. They are relatively inexpensive and you can trust your judgments since you’ve been active in the same realm. You can easily upsell your existing products. It’s a win-win and a surer and safer bet than a big ticket, overseas acquisition, where any one of the brands could suffer a dent depending upon the perceptions that surround the deal. If there is one sure winner in a big ticket deal, it’s the I-bankers and the advisers to the deal. The buyer rarely wins in overseas buyouts.

But the record is so much better in strategies that advocate acquiring local brands and strategic domestic investments. I see that trend in Indian Pharma space now - changing their tactics to concentrate on brand acquisitions and strategic investments rather than risky big ticket cross-border acquisitions. Some of my friends in I-banking circles tell me it’s the best time to buy businesses in the US since Rupee is on a record high against the dollar. But I don’t buy that line. You should buy a business only if it’s a sure value add in the long term, because it’s a one-off, game changing stuff. Not just because you have a favorable exchange rate, as matters to the import of raw material / capital goods.

But then my friends are I-Bankers and it suits them well to take that line. They have to get by :)
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Friday, December 28, 2007

Who will be India’s REITmeister..?

So, who will be India’s Sam Zell? Any guesses…?

SEBI has recently nodded in favor of setting up REITs in India. The much-awaited Real Estate Investment Trusts (REITs), which would invest directly in real estate projects after collecting funds from investors through the stock exchanges, are set to see their entry in Indian markets with SEBI putting out draft rules for such trusts. The conditions include –

What interests me most is that even though FDI in real estate is still a much debated issue, Private Equity firms will get an easier exit route. Private equity comes at the beginning and it takes 5 to 7 years for the projects to get ready. Since FDI is not allowed in finished projects, REITs will provide them a platform to exit. When we reckon that over $6 billion have been invested by PE funds in Indian realty companies, entry of REITs are most welcome – for the fund managers….:)
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Wednesday, December 26, 2007

Many hues of the world

Tom Friedman got it all wrong. Had the world been as flat as he thought it is, why do they scrimp at one end and splurge at the other? In the US and Europe, they worry recession, credit squeeze and speculate the impact of mortgage crisis. In Asia, it’s celebration time. They raise funds from public markets as if there are no tomorrows. Take a look at this data culled from a report from E&Y.

Indian bourses saw over $8 billion worth of initial public offers (IPOs) in 2007, but this is just a shade higher than the world's single-largest IPO by a Russia’s VTB Bank, which alone raised $8 billion. Largest Indian IPO was that of DLF that raised Rs.91.87 billion. ($2 billion plus).

Worldwide IPO activity raised a record capital of $255 billion till November in 2007, including $8.3 billion on Indian bourses. India was the fifth largest market in terms of number of IPOs and the seventh-largest in terms of the proceeds for the year. There were 95 IPOs till November 07 as against 78 IPOs raising $7.23 billion during 2006.

China came out on tops with total IPO proceeds of $54.4 billion through 222 issues. Globally, there were as many as 1,739 IPOs between January and November, while another 91 public issues are estimated to have hit the capital markets during December.
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All happening while US and Europe are wilting under mortgage mess. Did you say we are globalized...?
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Monday, December 24, 2007

Tata-JagRover bet - will it payoff...?

It is dangerous to substitute return on equity with business hubris when doing deals, and the whole thing had better make business sense” – goes T.N.Ninan of Business Standard on the Tata-Jaguar/Land Rover deal.

Ninan is sceptical even though Ratan Tata is getting both brands for $2 billion, much less than $5 billion paid by Ford to acquire them back in 1989 and further $10 billion that went into Jaguar to refurbish it. Rover is profitable, but Jaguar reportedly lost over $700 million in 2006 and perhaps over $550 million in 2007; it is expected to lose $300 million more in 2008. Rover sells close to 200,000 vehicles a year, but Jaguar sales have been falling quite sharply in its main market, the United States. He wonders whether Tata has bitten off more than he can chew. I am also reminded of Mitchell Madison and Whitman Hart deal where two billion $$ companies merged only to find the combined revenues were far less than $2 billion.

While Ninan concedes – going by earlier Tata buyouts overseas including Corus - that “Tata seems to have a good head for corporate strategy”, he doubts whether Tata would be able to achieve what Ford could not. He cites the examples of recent Sovereign wealth fund investments in Citigroup and Morgan Stanley (there are UBS, Merryl Lynch and Bear Stearns too) where the investors remain passive and would not insist on management control - but Indian acquirers love control. I say they have the chutzpah.

May be Ninan feels Tata could be in for a jam in this deal because of dealer perceptions, as he says “the people whom Tata would want on its side are the dealers in the US, but they seem to think Indian ownership is poor branding”.

My sense is that Ninan’s comparison of Tata-Jag Rover acquisition with fund infusion into American banks by Asia’s Sovereign funds is not quite up. Those funds are basically financial investors that focus on maximising ROI on their forex surplus as a part of their portfolio management strategy. To that extent, it's their fiscal management strategy too. They are concerned more about returns and not where it comes from. They simply don’t have the strategic bandwidth to take control and run diverse businesses that they invest in. Moreover, the managements of American banks like Citi, Merryl Lynch, Morgan Stanley are not bad by themselves going by the size and scale they've notched up. Just that they took a few bad bets that backfired. But that is to be expected because banking is indeed a business of betting on credit risks of varying degrees. What if those bets had paid off? But Tatas (and Lenovo example that he cites) are strategic investors with a track record of running global businesses and it’s not right to put them in the same basket as pure financial investors like wealth funds. The rationale behind their investments are fundamentally different. Tata would have certainly done their math and if the experience of Corus acquisition and its on-going integration is anything to go by, they would make the most of Jaguar-Land Rover deal too.
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Sunday, December 23, 2007

Private life insurers - another scam in the making?

The private life insurance industry has sought an additional four-year grace period to carry forward its losses since most insurers have failed to break even, even after eight years of operations. At present, losses can be carried forward only up to eight years. The industry has also sought a separate limit u/s.80-C of IT Act for long-term savings.

But I chuckle and split my gut over something else. They face a problem which LIC never had. Current provisions mandate that insurance companies must list within 10 years of operations. Under Section 6AA of the Insurance Act, 1938, Indian promoters have to scale down their stake to 26% within 10 years of operations. This amendment is being considered by the group of ministers (GoM) set up to examine the comprehensive insurance legislation.

It's catch 22. Insurance companies, which are into their eighth year of operations, might not be ready to go public yet, since they are yet to break even. SEBI mandates a company may list only after three years of registering profits. Insurance companies, however, are already being valued at skyrocketing levels. For instance, ICICI Financial Services — the proposed holding company — has been valued at more than $10 billion post-issue. But its earnings are still negative. How did they get such a lucrative valuation? Who valued them? No answers.

That’s the catch. They've taken the extension of time beyond eight years for granted. Their hand picked I-Bankers have arrived at a valuation based on fees they got. But they can't justify that valuation now since they continue to make losses. If they go public now, they may have to pay the investors to buy their shares. It’s going to be eight years now and they are yet to break the stranglehold that LIC has over its customers and turn cash flow positive. Meanwhile these guys spend millions on advertisements to spread insurance awareness. But clearly, it's LIC that's getting the mileage.

Going by the trend, they will not make a profit in another 10 years or so. So their strategy is, keep running to the government for extension of time. The question is, how long should the government forego its tax revenues to subsidise private insurers’ poor performance…? What public good do they stand for? Should the government wimp out just to enrich Indian promoters when they off-load their stakes? How else do you define a scam?
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Mr.Chidambaram, don't you see the bullshit meter turning red...?
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Friday, December 21, 2007

Never play a stock ; Play the analyst...

Ok, scumbags. You didn’t listen when I tipped you in on Sugar stocks. Now grieve. No, I don’t look at fundamentals. I don’t look at technicals. That’s for friggin’ chartists who make a living by staring at computer screens and fooling the world with their harebrained forecasts that never come true. They work for an end of month paycheck and commissions. You and I bet our hard earned money on the stocks that these guys `think’ would go up… If you do, you’ll be getting out soon. Out of this game.

In India, you bet on politics. I always do. I bet on the minister. More influential he is, more loyal his voters are. That's why I tipped sugar stocks. Look at this “sweet” guy Sharad Pawar, Agriculture Minister. He answers my wish list to the T. I know how his mind works. I’ll share it with you. This guy loves just two things - the sugar belt of Baramati and BCCI, one of world's richest sports (Cricket) bodies. Let’s keep cricket out for the time being. The folks over there at Baramati, eat sugarcane for breakfast and molasses for lunch. They sleep on mats made out of cane leaves and wear sugar coats for dinner. They don’t drink water, they feast on cane juice. They all die of diabetes and the chemists there have made their fortunes just by selling insulin. The only thing they know is to vote this guy Pawar back to power. That’s it – isn't it simple enough? Either they are at the cane fields or at the polling booth. That's how they lead their lives. He will give us more of good news on Sugar because he needs those sugar coated votes. The folks at Baramati don’t vote if it isn’t dude Pawar’s name on the ballot. So I say, buy sugar stocks. As much as you can. I do. Never sell your sugar stocks so long as you got this Sugar Daddy at the top and as long as analysts keep talking it down. Sell them only if pawar man leaves the deck or when analysts talk it up.

Now mill owners, keep a steady supply of Ethanol even during weak season. Daddy will hike the blending ceiling from 10% to as much as you can make. He’s struck a deal with that Deora guy at Petroleum ministry. They’re on phone all the time. When they meet in public, they wink and nod a lot. Export subsidy? Granted. Kamal Nath won’t object. A deal there too. Co-generation ? Go ahead. Life’s good. That's my fundamental and technical analysis for you. What say you...?
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Don’t believe a word those friggin' analysts say. They all will trash a sector while their broking bosses are stocking up on it. When they’ve had enough, they’ll talk as if that’s going to be the next big thing. That’s when you should dump your stocks and rip those suckers.

Don’t play the stock. Play the fuckin' analyst. You heard me….!
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Thursday, December 20, 2007

IFCI Snafu

It's all badly fucked up at IFCI.
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If I were the FM, I would say this to IFCI management -- "Get that sand out of your cracks, guys. This stuff is hard work, now don't botch this up".... You should see the muck that gets raked over by our guys at IFCI that screwed up the Sterlite-Morgan deal. Let me put it this way. Some of its Board members aren't going to see such cushy jobs ever again. Too many perks for running a company aground. Then the government steps in with some concessions. As if by godsend, the real estate market too turned hot and suddenly the textile mills and other companies owning large swathes of land or belonging to sectors in the limelight (a la steel and cement) in IFCI's long NPA list became highly valued - by default. Now the jokers in IFCI board want to claim credit for turning it around when in fact, all they did was to try and turn it upside down – something that they almost accomplished. Someone in IFCI told me these guys pop a Viagra a day even to get up and walk straight....

Now they also want private investors to buy 26% but can’t let go off management control. If you add in the additional 20% public offer the investor will have to make, the new investor will end up holding 46% stake in the company for just 25% of management control (just two out of eight board seats) and no rights to appoint CEO. Now who will agree to that?

IFCI stock had lost 23% in the markets on Thursday. What if it were a Private sector management that announced the deal, named the bidder the day before and screws it up the next morning…? SEBI will be all over them for misleading investors for talking up and spooking the market intentionally.

Next time IFCI has a suitor, I suggest go put shock collars around its management. If they try to act up, they get through the invisible fence -- boom. Unconscious. They wake up in some casualty ward, never to be back at their desks again.
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Monday, December 17, 2007

Infrastructure revamp...? Plan for relocation too


Vinayak Chatterjee has a nice take on new measures required to catalyze badly needed infrastructure investments.

Chatterjee has cited several refreshingly fresh initiatives included in two special committee reports DPCR and SCR.

But aside of what is contained in that summation, not just the socialist in me, but the sensible capitalist also still don’t see how they are going to relocate those who get displaced when new infrastructure comes up. You invest billions of dollars in creation of new infrastructure and don’t plan for relocation of those that used to make a living out of the pre-displaced environs and that’s terrible. In China, they are facing a backlash because of this. Let’s not repeat it in India because here we don’t rule with an iron fist. Our governments live from election to election or worse till a mid-term poll in these times of coalition governments.

The short sighted acts like this breed Mayawatis and C.K.Janus here… The former wanted to build shopping malls around Taj Corridor (and gobbled up Rs.1.75 billion in the process) and the latter defiled the pavements of Kerala Secretariat. Haven’t we had enough of them and their antics…?

Please.
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The in and out economy

First we raced to globalize. Then we hurried to decouple. But did we…? If so, why this…?

Will someone please give me a new expression…?
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Thursday, December 13, 2007

India M&A deal book

Orit Gadiesh, Chairman of Bain & Co., co-authors a piece in today’s ET after taking a look at Indian M&A deal book. He looks at it from three perspectives.

Deal size & volume - From Jan-Oct 2007, Indian companies closed outbound deals totaling $34 billion, exceeded China ($13 b) and Russia ($15b) combined. During 2003-07, the annual deal sizes grew at a CAGR of 108%.

Success rate – Too early to tell. But one-third seems to be a fair guess keeping in line with US and Europe.

Domestic M&A – Inbound deals by companies in India was only 8% of outbound deals, or $2.6 billion in the first ten months of 2007. Why so? a) lack of access to leveraged financing b) Firms are mostly family managed and are reluctant to sell.

Sounds good… But don’t make these mistakes.
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Wednesday, December 12, 2007

Friendly rip-off


So you’re puzzled why your trades in T segment always face “technical snags” and the shares never get delivered on the 3rd day. Here is why.

Every transaction in the ‘T’ group has to compulsorily result in deliveries; the buyer or seller cannot square off his position intra-day. Often, many sellers are unable to meet their delivery obligations for a variety of reasons. Unlike in other segments, T segment stocks are not auctioned. The seller’s positions are *closed out* by levying a 20% penalty on the seller that gets credited to the buyer, to make up for non-delivery. So if you buy a stock for Rs.100 on Monday and the seller fails to deliver, on Wednesday, you’ll get a credit equaling 20% of its Tuesday’s closing price. If that is Rs.90/-, you'll get a credit of Rs.108/- (120% of Rs.90)

Here is where the *friendly* broker rips you off. On the settlement day, the broker gets the details of his pay-in and pay-out obligations on his work station from the exchange at 1:30-2:00 pm. Occasionally he will find that some of the purchase positions of his clients in ‘T’ group shares have been closed out, and the prices of those shares are now trading at a price lower than what his client had bought them for. He then buys those shares at low prices and credits them to your account. In the process, he gets to pocket the Rs.18/- differential credit from closed out positions that originally belongs to you.
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Now you know how brokerages quickly get into billion $$ leagues....
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Monday, December 10, 2007

Controlled bleeding or cauterization...?

Agreed, not so upbeat title for an Economist story with no hemal touch. But as an opener, it isn’t entirely out of place either. The metaphor fits in water tight. Excerpts -

"That was the unappealing choice facing UBS, a Swiss bank which has been badly hurt by the carnage in America’s mortgage market. Today, the bank opted for the latter. First it opened the wound, by announcing a hefty $10 billion write-down on its exposure to subprime infected debt. UBS now expects a loss for the fourth quarter, which ends this month. It may end up in the red for the entire year. Then came the hot iron: news of a series of measures to shore up the bank’s capital base, among them investments from sovereign-wealth funds in Singapore and the Middle East."

[It started with Merryl Lynch, then Morgan Stanley and Citi Group bringing up the rear.] "Why then did this new batch of red ink still come as a shock? The answer lies not in the scale of the overall loss, more in UBS’s decision to take the hit in one go. The bank’s mark-to-model approach to valuing its subprime-related holdings had been based on payments data from the underlying mortgage loans. Although these data show a worsening in credit quality, the deterioration is slower than mark-to-market valuations, which have the effect of instantly crystallising all expected future losses."

Will this bloodbath end, ever…? Loss of reputation for a conservative bank like UBS is deep enough cut. What is worse is the impact that has exposed the fluidity of its capital adequacy ratios at the tier 1 level. Of course, it has rich friends ready to pitch in. The white knights include sovereign-wealth funds (GIC, Singapore) and rich middle east investors that have pledged support to shore up its bottomline by infusing SFr 19.4 billion. Marrying bigger-than-expected write-downs with bigger-than-expected boosts to capital looks like the right treatment in this environment. But UBS still cannot be sure that its problems are over.
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Sunday, December 09, 2007

The box needs fixing

So Deloitte runs a survey on the potential return for PE firms in India, going forward. It says Global private equity firms are expecting lower returns from India in the next six months as a booming economy and stock market drive up valuations. The basis ? Callow statements like this - “There is no more low-hanging fruit. India has been discovered. We will see more moderate – 20-25 per cent – returns going forward.”

The PE firms can do with a bit of open mind and flexibility. They have to innovate and adapt. You can’t make money in India by just transposing the same business process that are followed in the US or Europe. Result – they keep whining on their clich├ęd gripes (a) ban on leveraged buyouts (b) families that own businesses are reluctant to sell (c) restriction on issue of convertible preference shares and other regulatory impediments.

That puts me in a mood to quip.

Take gripe (a) – leveraged buyouts are banned. So what? That's why we didn’t have a credit crisis and points to a credible lending process that insulates Indian banks from global crises. The fact that doubtful debt can’t be bundled with a good credit risk and palmed off to unsuspecting bond investors is a sign of systemic maturity. [Indian banks faced a crisis 10 years back when most of our PSU banks had high NPAs because major borrowers didn’t repay. They siphoned the funds to build their personal assets even as their companies were going broke. Now that's plugged].

On gripe (b) families don’t sell out - because they feel one of them will be shortchanged in the process by the dominant share owning family member. Search for recent scuffle at Patni (computers) and Bajaj (Auto) families. The strategy here for PE firms is to get upclose with the family and broach the subject thro an investment banker that is close to the management. Choose the wrong messenger and you lose the deal. For that you need someone that is pretty much clued in… Why not me? Yeah, You can try.

The gripe (c) is on choice of instruments. Yes, convertible preference shares have been banned in construction and real estate since PE firms took that route to breach the FDI limits prescribed for the sector. PE firms lent against convertibles and the money was never repaid. In effect it was indirect infusion of equity since the loans were convertible into common stock. They used that to jack up their stakes in real estate companies that had huge land banks. You try to break a law and you're sure to be canned. But they can pitch for specific projects. Use a strategic investor, that is a professional consulting / EPC firm that can capitalize (thereby part-fund) the project cost. There are several other ways but then I can't blog everything here. I need to make a living too, pal....

If you are creative enough, there are ways to have the cake and eat it too… I’ll tell you what’s the problem. Investment banks don’t innovate. They just want to ride the coat-tails of their colleagues in the west. No, I am not asking you to start thinking out of the box. If one has to do that often, then the box needs fixing. It's a bit like walking between raindrops, agreed. Or a closer parallel will be learning to drive on a pot-holed road without getting a flat tire way too often. The day you get it right, you'll sight opportunities here all the more.
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Saturday, December 08, 2007

Back to gold standard...?

Here is a new insight into our swelling foreign exchange reserves.

The frenetic build-up of forex reserves has lost pace with reserves growing by only $1.2 billion during the week ended November 30 to $273.5 billion. Of the $1.2-billion increase in reserves, $546 million came from an increase in the value of gold. The increase in foreign currency assets was just only $694 million - according to the figures released by the Reserve Bank of India (RBI) in its weekly statistical supplement (WSS).

The RBI has the challenge of maintaining the desired level of liquidity in the market, which it has been through sale of bonds. But this too entails a cost as these bonds need to be serviced at fairly high rates.

Should RBI dump the dollar and switch to good old gold standard, at least a part of its kitty…? If you look at the way the dollar is plunging against global currencies, it makes awesome sense….
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Thursday, December 06, 2007

Don't hire an engineer when you need an accountant

Ashish K Bhattacharya rants on the poor accounting literacy of MBAs. He seems to be quite modest in that he restricts it to students not wanting to specialize in finance; but I go even the specialists are no better.

Map it to reality. It’s almost six months since MBA bankers in Wall Street began counting losses on CDO’s built into sub-prime mortgages. Heads roll, albeit with bumper payoff. Numbers fly. Here, here and here. But they’re still counting. Most of these MBAs have engineering background and they are supposed to be good, sorry; brilliant at math….!

But look at what these “financial engineers” have done to the credit markets. They invented the time bomb – subprime derivative time bombs I mean. The exotic derivatives that the MBA designed, called CDOs kept all liabilities off balance sheet and investors had no idea what they were letting themselves in for if borrowers go broke. They did and that’s why they are still counting.

This is the leitmotif of this whole thing: Half baked MBAs played havoc with mortgage banking. They write loans just to build the book, thinking they will worry about risks later. But now it's later.

Financial Risk management has long ceased to be the preserve of conscientious accountants that feared risks, knew the law, respected disclosure, and lost sleep over declining ROI. Now it’s the domain of MBAs that contrive fabulous stock options and packages for themselves. Or worse, it’s usurped by robots and algorithms. That’s how it becomes financial engineering. Shareholder who? They ask. Look at the exotic derivatives that hid more than they revealed. A shareholder is often the last to know the exact liabilities of the business, a piece of which he actually owns.

Hire MBAs by all means. But make sure they have their fundamentals right and their feet stays rooted to the ground.
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Bihar shows the way...

To attract investment in sugarcane-based industries, the state government amended the Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981, earlier this year, allowing sugarcane juice to be directly used to produce ethanol or rectified spirit and for co-generation of power. For sugarcane-based industries,the state is also offering a capital subsidy of 10 per cent of the investment, subject to a Rs 100 million ceiling.

Result –

Reliance Industries, Tata Chemicals, Bharti Enterprises’ Fieldfresh and Indian Oil are among several large companies that have evinced interest in leasing closed sugar mills that the Bihar government is offering, mainly to exploit opportunities to make ethanol to meet mandatory petrol blending norms that were introduced this year. Other companies that have acquired the request for qualification (RFQ) forms are public sector Bharat Petroleum and Hindustan Petroleum, and Renuka Sugars, Upper Ganges Sugar, Dhampur Sugar and India Glycols.

Closed for more than a decade, these mills together have a financial liability of Rs 700 crore under various heads and the funds raised by leasing them will be used to clear the liabilities. Last month, the Bihar government decided to offer 15 closed mills belonging to the Bihar State Sugar Corporation on a long-term lease of 60 years, extendable by 30 years, on the recommendation of SBI Capital Markets. Of the 15 mills, eight have been reserved for sugarcane-based industries such as sugar mills or distilleries for ethanol or alcohol production. The remaining seven can be used for industries that may not be sugarcane-based.

A pre-bid meeting is scheduled on December 8 in New Delhi.

Contrast this to what happened in UP that prompted me to send out a wish list. And we call Bihar backward…!
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Sunday, December 02, 2007

Gisele Bundchen should stick with me

I am concerned for the stunning super model Gisele Bundchen - not that she’s losing any of her luscious curves. She’s sexy as ever. But just how wise has she been in switching to Euro?
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Even Central Banks, having spurned the chance to diversify out of dollars when a euro could be bought for 86 cents, are unlikely to want to switch now when the price is close to $1.50. Against conventional benchmarks like purchasing-power parity, the euro looks dear against the dollar. So it could be a bad time to swap from one horse to another.

The Economist concludes a full blown dollar collapse could be disastrous. What lends the dollar's decline an air of crisis is that the world's bloated currency reserves are crammed with depreciating dollar assets. Foreign-exchange stockpiles have almost tripled to $5.7 trillion since the beginning of the decade. China alone has $1.4 trillion of reserves. Japan's $1 trillion or so make it the second-largest holder. To the extent that dollar-holders act like an informal cartel, the biggest dollar-holders will set an example. Japan seems unlikely to start selling its huge dollar reserves—if anything it might intervene to prevent the dollar falling further against the yen. A crash might be averted if China holds fast too, because it recognizes how self-defeating dumping dollars would be to such a large owner of American assets.

In this period of swelling reserves, the dollar has retained its pre-eminence. It still accounts for nearly 65% of identifiable currency-stockpiles, according to the latest IMF data. This is broadly in line with its historical share. Factor in the dollars hoarded by China and Middle Eastern oil exporters (not included in the IMF breakdown) and the dollar's share may be higher still.

The dollar's place as a reserve currency always seems to be questioned when it falls. Weakness in 1977-79, 1985-88 and 1993-95 was each time met with predictions that governments were about to switch their reserves into another currency. A burst of high inflation, which undermined the dollar in the late 1970s, made that slide as serious as today's scare is. Between 1978 and 1980 the Treasury sold $6.4 billion of “Carter bonds”, mostly denominated in Deutschmarks, to raise funds to defend the dollar. In January 1980 the gold price reached a record $835 (around $2,250 in today's prices) as investors sought an alternative store of value. And when the dollar fell to ¥81 in 1995, many—including the Economist —saw it as the beginning of the end of its reserve-currency status.

So I lay my bets on the greenback still. Someone please ask Gisele to stick with me -)
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