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The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch ✹✺🐝 SILVER
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Number: of 22352 
Subject: Re: Sterling devaluation risk?
Date: 09/12/25 6:22 AM
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Just some general rules of thumb on that general subject:

In terms of the currency exposure of your holdings, ignore where the company is incorporated and where it is listed. What matters more than anything is the geographic distribution of their revenues.

The secondary importance is the geographic (currency) distribution of their expenses. A firm that is mostly an importer/retailer will be in trouble if their home currency falls, and have windfall profits if it rises. A firm that is mostly make-locally-and-export will have the reverse situation.

But it's important to make the distinction between actual changes in profitability for those unbalanced firms, and apparent changes in profitability due to accounting in a single currency. For example, consider a multinational a firm with fairly balanced revenue and expense exposure to currencies. They have factories in the big countries they mostly sell in. Now imagine the currency where they are incorporated falls. Their reported profits seem to go up because their "foreign" income has risen measured in shrinking local currency units, but they didn't really. It's illusory.

Jim
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