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Technology Stocks : Intel Corporation (INTC)
INTC 40.51-7.4%3:59 PM EST
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To: Amy J who wrote (173310)3/6/2003 11:08:17 AM
From: chomolungma  Read Replies (1) of 186894
 
Amy,

From your linked article:

What's more, a falling dollar could discourage foreign investors in U.S. financial markets, since the returns from their investments are coming in ever-less-useful dollars.

What an uninformed comment. A decline in the dollar makes dollar denominated assets cheaper. So all he's saying is that people won't by assets that have gotten cheaper because they are afraid they will get even cheaper. Isn't that the sort of momentum investing that has been so disastrous lately?

The recent decline in the dollar will be a major plus for American businesses. In fact, my research leads me to believe that the level of the dollar is one of the most important variables in determining profit margins. With the recent decline in the dollar, profit margins will rise. Generally there is a lag, called the J curve, as a currency decline takes a while to work its way through and for businesses to change their habits. The S&P 500 gets about 25% of its profits from overseas and a 20% decline in the dollar will translate these profits back at a higher level. But that's only the beginning as competition for the sale of goods at home lessens and allows business to increase their profitability.

So if foreigners avoid U.S. assets just because they fear the trend in the dollar is lower, they are going to be avoiding stocks of companies who are becoming more and more profitable.
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