War. What is it good for? Loading up on flat screens

Debt Man column – The West Australian (Business)

For: October 15, 2010.

Bruce Brammall

Debt Man

It’s time to admit that I don’t think I’d make a very good traditional soldier.

I’m not too good with blood and guts. Not that I get queazy, just that I’m no fan of “ER” or “RPA” because people’s insides are on the inside for a reason – if we were supposed to see there, God would have made our stomachs out of glass.

But I am no hippy peacenik protestor either. I’ve never sung anti-war songs, or believed in “flower power”. I wouldn’t sit in front of a tank to stop it rolling down Main St to do it’s job … if that job was to disperse protesting hippy peaceniks.

I have shot a few guns. On one occasion, I was swayed into repeatedly shooting by a farmer’s insistence that those bunnies had to die, because they were plague vermin.

In the words of Edwin Starr (or was it Richie Benaud on The 12^th Man?) … “war, whoa, whoa, whoa, what is it good for?” I could take it or leave it. I’d rather play Monopoly.

So, to actually get excited about a war? Well that’s a strange feeling. But we’ve got one on our hands. And it’s one for the money buffs.

Hostilities have been declared between Red China and Uncle Sam. They’re calling it the “currency wars”. Catchy new phrase. Bound to catch on.

What’s the issue? The US claims China is holding down its exchange rate to make itself more competitive, which is harming US competitiveness. China claims the US is holding down interest rates, which is creating a global imbalance of cash holdings.

Basil Fawlty: “You started it.”

Elder Herr: “We did not start it!”

Basil: “Yes you did. You invaded Poland!”

The International Monetary Fund is trying to broker a settlement between Beijing and Washington. And failing miserably.

Tensions are rising. Countries are taking up arms. This is a global war. “World War III” might be too dramatic, but there are skirmishes everywhere.

A war about money? Finally! I’ll proudly participate. I’m comfortable with the weapons. I can do something for my country.

This war is even more cool than that. You can make a buck from this war. In your office, dressed in your jocks. But I’ll come back to that.

I understand that the whole concept of a ‘currency war’ is new. So I’ve compiled some FAQs.

Q: “Does ‘currency war’ mean we find a country we hate and throw coins at them?” A: Not if it’s your own money. Yes, if you’re throwing someone else’s, like Barack Obama’s. His money is worthless – it can’t even buy him votes.

Q: “Who’s the enemy?” A: If China saved us from the last recession and the voters won’t buy that it’s the US … then it must be New Zealand! It’s the bloody Kiwis.

Q: “What’s the best way to be patriotic and get involved?” A: Overseas holidays. Go visit the warzones. Impress foreigners with the strength of our mighty dollar. Disneyland and Florida haven’t been this cheap for decades.

Q: “How do we win the war?” A: Having the most money, or having the most of America’s money. In which case, China invented the game, has rigged the board and is starting a long way ahead.

Q: “Does Australia risk another Gallipoli siding with the Brits?” A: Have you seen their economy? If anyone’s taking orders, they’ll be going over the trenches for us this time.

Q: “Can the US invoke the ANZUS alliance to make us help them?” A: Did they come to our rescue in 2000-01 when the jumbuck fell below US50c? No! They came over in droves for the Sydney Olympics and pillaged us.

I hope that helps. More importantly, how can you profit from this money war? Our high Aussie dollar raises opportunities for consumers and investors. Here’s my war plan.

First, I’m going to switch some more of my international managed funds from hedged to unhedged. If our dollar falls, I’ll be ahead on a relative value (even if world markets fall).

Second, you just know that when Gerry Harvey moans that he’s never sold so much for so little profit, it’s time to load up on flat screens.

Third, I’m going to book a holiday. Soon. To a war zone. And I’ll pack my khakis.

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and a licensed financial adviser. bruce@debtman.com.au .