Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Chispas who wrote (452)	2/23/2004 1:48:09 AM
From: mishedlo	Read Replies (1) of 116555

I'm puzzled I have noticed this before and even commented on it but it really seems illogical. 1)US$ rallies gold falls silver falls Copper falls Platinum falls oil falls Eurodollars fall I understand all but the last one. In theory falling commodities should signal less inflation and therefore Eurodollars should rise (less inflation=less need for the fed to hike) Gold and Eurodollars often have moved together and I thought it odd, but watching all these together tonight really made me stop and think. I can understand how a rising US$ would be bad for the markets (more in theory than in practice: the theory of course is that it will help exports) and indeed the market more or less has had a loose inverse correlation to the US$, but why should Eurodollars rise with rising commodities? The only possible explantion is the article posted earlier that Japan will need to buy fewer treasuries if the US$ rises and if they buy fewer treasuries then the FED will be "forced" to hike rates. If a rising $ is bad for the stock market, would the FED be hiking interest rates into that. Eurodollars do move violently with job data usually but more often than not follow the markets up or down. Perhaps I have this backwards. Let's see. Eurodollars are really the driving force and when they fall that is bad for the stock market. OK that makes sense but falling eurodollars should not mean falling copper. UG Something does not compute. What is it? Lets try again. Low interest rates mean higher copper/gold/silver prices. Means higher stock prices cause the market likes easy al. means inflation has a chance and every damn thing is happy with inflation. Anything and everything is happy with inflation. Even treasuries like inflation. ug. This is going nowhere. One more try. The market does not believe gold/silver/copper/oil have anything to do with inflation. OK Eurodollars go up - money is easy and the stock market is happy Eurodollars and treasuries are correlated so as long as japan is buying treasuries easy al can stay easy and keep treasuries, eurodollars, and the markets happy. Japan will keep buying treasuries as long as the $ is falling. Gold, silver, copper, and oil prices simply do not matter, and everything is beautiful as long as the US$ is falling. Mish

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