Very worried! I equate this to: How worried should the airlines have been about the likelihood of increase fuel prices. One airline did what I would have expected all airlines to do, to ensure that the cost of delivering the product is as fixed as possible - Business 101. So the majority of airlines thought that Business 101 did not apply to them as “none is protecting against that risk.” Ok, so most airlines went into bankruptcy or financial distress while Southwest Airlines was posting their 50 something consecutive profitable quarters. For at least 18 months Southwest Airlines achieved a competitive advantage and the market really did not allow for a fuel surcharge. China, its currency and its participants will not be any different. The next move by the Chinese will be 3-5% revaluation and that will weaken the US Dollar enough to significantly eat into margins of the companies that are not hedging their Chinese expenses right now. The winners will be the companies that are hedging that risk currently. The revaluation is certain, the only question is when? As there will be – like last July – no warning, there will be no time to react. It will be a fait de complis.
