kiplinger connection
The Dollar • Housing • Tech Costs

The Dollar: Still on a slow, downward drift.
Housing: Not hitting bottom until mid-2008.
Tech Costs: Try a bulk plan for employees’ cell phones.

The Dollar
What's ahead for the drooping dollar?
More of the same, with periodic rallies providing breaks in a longer-term drift lower.
The sluggish economy will take a toll through at least the middle of 2008. With growth slowing here more dramatically than in most other countries, currency traders will place more bets on euros, pounds, etc.
Lower interest rates will also hurt. Other countries won’t move to cut their rates just because the Federal Reserve is doing it. That means more short-term currency investors will seek higher yields outside the U.S.

The dollar will firm up in late 2008, when the U.S. economy shows a bit of bounce.
But the currency won't be in the clear.
Fundamental global changes are at work that are eroding the dollar’s historical role as the standard-bearer for most of the world.
Fewer reserves will be held in dollars. Foreign countries are forgoing the safe harbor of the dollar to tap opportunities elsewhere with more growth potential.
And the euro is emerging as a keen competitor to the dollar. Sellers of oil and other commodities may soon be ready to accept either.
Still, the greenback won’t collapse. The economy’s resilience and the depth of U.S. financial markets will always attract investors.
But there is little reason to expect long rallies for the dollar.

For the economy and some U.S. firms, the soft buck has benefits:
More exports. The U.S. trade deficit is finally narrowing, now that aircraft, farm goods, and other key exports are racking up gains.
Less import competition. For example, U.S. chemical firms' sales
at home have risen at the expense of European and Japanese companies.
Higher earnings from overseas units. Their profits are worth more when they’re converted back to dollars. Affiliate income from Europe, which accounts for more than half the income that U.S. firms earn abroad, was up 14% in the first six months of 2007 over the same period of 2006.

But pricier imports are a burden for others facing cost hikes.
High import bills will add fuel to inflation, already stoked by wage costs. Plus foreign investors will demand higher interest rates on the U.S. Treasuries they hold to offset currency-related losses.
Upward pressure on interest rates will dampen economic growth. Along with the housing slump, it'll be a big challenge to any expansion.

Housing
Forget about a noticeable pickup in the housing sector next year.
Recent figures point to a huge overhang of unsold inventory ... for existing homes, nearly 10 months' worth of sales at the current pace. There hasn't been so much slack since just before the early-1990s slump.
Home sales are measly and will be even worse six months from now.
We still expect housing activity to bottom out around mid-2008, but the move to renewed growth will be so slow as to be nearly invisible.

Look for housing starts to slump to 1.25 million, down 100,000 from this year and the slowest pace of home building since 1992. Sales of existing homes will slip by 400,000 or so to 5.3 million, while sales of new homes will likely fall to about 825,000, down 55,000.
House prices...down 5% more after slipping 4% this year. A much bigger decline ... up to 20% ... in areas where pricey homes dominate and buyers need loans greater than $417,000. Rates on these jumbo loans have climbed three-quarters of a point, on average, since early Aug., whereas rates on smaller loans have fallen a tad. Areas affected include much of Calif., Fla., and the suburbs outside Washington, D.C.

Tech Costs
Cell phone bills hurting your bottom line? Try a bulk plan. Firms that deal directly with wireless companies pay much less than those that let their employees work out their own deals.
Group discounts will soon grow from 10% to 15% for phone bills for employers. With administrative costs rising, wireless vendors want to get more companies on group payment plans. About 50% of employers provide their key workers, particularly salespeople, with mobile phones. Of those firms, half pay the bills directly and half reimburse employees.
Most firms won’t end up paying more for employees’ personal calls because so many calling plans have unlimited minutes or come close to it.

Businesses can look forward to more choices for office software as IBM, Google, and others give Microsoft a run for its money. Their newest products are more efficient, without the complicated steps once needed to convert from Microsoft’s Word, Excel, and PowerPoint.
The latest is IBM's Lotus Symphony, which includes spreadsheets, word processing, and presentation software. It can be downloaded free. Among others are OpenOffice.org and Google Docs, an online service.
But the free software is best for employees with limited needs ... occasional spreadsheets and relatively simple documents for customers.
Those requiring complex formats will stick with Microsoft Office, especially if documents need graphics or involve complicated templates.