The USA has been enjoying a very, very strong dollar for quite some time. From a geo-political and military vantage point, there has been a lot of good accomplished from having a strong USA dollar.
But there is a bad side to having a strong USA dollar at financial reporting time. A strong USA dollar for American-based companies make it appear as if foreign operations underperformed. Canadian branches, for example, have to manage their costs to compensate for a Canadian dollar valued at approx. 70% of the USA dollar. When those results are rolled into the combined financial statements, if Canadian operations had not forecasted a dollar as low as 70 cents, then it will appear as if Canada failed to hit targets.
The strength of the USA dollar has been relatively unexpected and has lasted far longer than many companies had planned. So, during this earnings season it will appear as if most, if not all, subsidiaries of USA-based companies underperformed. Meaning, their profits fell short of forecast. If that is so, and it likely is, then those same subsidiaries will be pressured by their USA-based head offices to cut operating costs drastically to re-establish an appropriate balance between their costs and their projected profits. That likely means MANY MORE LAYOFFS COMING!!
All hands on deck. Pay attention to the news over the next several months during this first quarter earnings reporting season. Watch for a growing list of companies blaming their missed profit targets on “TRANSLATION EFFECT”, (converting from foreign currencies into USA currency for reporting purposes).
Since those same companies have already pared back their costs, they likely already had a round of layoffs of what they consider their least essential workers. When the results are rolled together, we can expect very disappointed operating committees and appalled boards of directors to demand much more cost cutting and many more layoffs and to cut deeply into essential workers, too. That means YOUR job may be in jeopardy and that you may learn of that in the next few weeks or months.
What can you do about this?
- Talk to a certified financial planner to seek advice about protecting any investments. This is not a food time to play at being an amateur investor. Leave it to the pros.
- Work smarter to make yourself a more valuable employee.
- And, freshen your resume just in case you are caught in the next round of layoffs.
Smart people prepare for the worst while hoping for the best. You might also want to read my helpful Nuggets at the following links: