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# Nintendo Co. Ltd. Message Board

• gazerker gazerker Jan 18, 2008 12:39 PM Flag

## Question To The Economics Majors Out There

What effect does the YEN - Dollar ratio (or strength of one, the other, or both) have on the ADR price of NTDOY.pk?

Should we be rooting for a higher or lower number of Yen to the dollar?

What other currency issues affect the stock price?

Gazerker

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• Good grief, LOL. There's much more than just the dollar at play. I.e. "It IS NOT" a direct relationship... The currency effect comes into play by positively boosting "earnings". That makes the eps better than it would be otherwise and the stock therefore goes up more than it would otherwise have. That's how you benefit from the currency repatriation "NOT" by a daily currency change... GL2U

GITA!!!

• Dollar is down today and 7974.os is up a bit.

• I'm no Economist but I'll try to help. Do you want the simple answer or the expanded one?... I’ll give both:

--> The simple answer would be a stronger Yen.

--> Here's the expanded explanation:
For illustration assume \$60 stock, 100Y to \$1, and that the "only variable" is currency:
If the stock cost \$60US it would be \$6,000Y (6000/100).

1) If the yen weakens it takes more yen to = \$1. A weakened Yen would be 110Y to \$1. At that rate the stock would be \$54.55 (6,000/110).

2) If the yen strengthened it would take fewer yen to = \$1. A stronger Yen would be 90Y to \$1. At that rate the stock would be \$66.67 (6,000/110).

The problem is that as the Yen strengthens against the dollar it eventually causes price inflation which tends to raise prices. The good news is that it takes a while for the inflationary aspect to trickle down vs. the more immediate affect on the stock price so I guess you want a stronger Yen. Long term you want to hope for a stronger dollar (vs. the Euro/Pound at least) so you can maybe take a trip and not pay \$100 for a pizza and 4 drinks...

BTW: Just fyi for anyone who might not know this: There is an 8-1 ratio of the Japan stock to the ntdoy.pk ADR's

GITA (Good Investing To All)!!!

• 2 Replies to flyerd1
• Unfortunately none of that simple math matters! You want a stronger dollar, NOT a stronger yen, because the profits from the US are sooooo crucial in valuation since America counts for so much of the overall earnings. Stronger dollars equal more yen/money on the balance sheet.

The reason the stock price changes is much more linked to expected earnings than the fluctuation in the exchange rate. My boyfriend is a legitimate Economics major and set me straight! I used to think the same thing the other guy said. Truth is, if the \$249 US Dollar wii translates to fewer yen that is BAD for the company and the stock price.

• Thanks! That is exactly what i was looking for.

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