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Politics : Formerly About Applied Materials
AMAT 252.25+0.9%Nov 28 9:30 AM EST
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To: chomolungma who wrote (67798)2/13/2003 12:25:39 PM
From: chomolungma  Read Replies (1) of 70976
 
And speaking of currencies, although most probably have already started to skip my posts on the subject, I think that the decline in the dollar will have an extremely positive impact on the earnings of the S&P 500. The numbers I have seen indicate that about 25% of S&P earnings come from abroad. These will now be translated back to dollars at a lower rate thus boosting earnings.

But it doesn't stop there. The lessened competition from abroad, due to the weak dollar, will boost profit margins of U.S. companies. I made a chart the other day showing profit margins over the last 30 years and then drew a rough line of the dollar level. It's not a perfect correlation, but the time when margins were the lowest was when the dollar was the highest. It makes perfect sense to me since I hold that competition is the number one factor in profitability. If I'm right, the coming years may produce a wonderful growth in profits and you know what that'll do to the stock market.
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