As you mentioned, a weaker dollar (which by the way is magnified as Greenspan continues to lower interest rates) will also create an outflow of funds from the U.S., which will likely put pressure on the stock market, including Lucent stock. So while Lucent profits from a more competitive position overseas, there is less $$ here to bid up Lucent stock.
The outflow of funds by foreign investor may affect the US stock market for the moment as US interest rates go lower, and more importantly as the dollar begins to depreciate.
This will affect the overall return for a foreign investor,since not only does he have to consider the return in the possible appreciation of the US stock, but now the investor has to take into account the currency risk, facing a loss of value of US Dollar assets, vs foreign currencies.
More importantly is to consider the rate of growth of the US companies, based on fundamentals that apply in the future.
Yet another reason to invest in quality US companies, as these companies tend to be in a far better position to profit from the new environment (a weaker dollar), as its export sales presumably will benefit.
There are many reasons why. At this particular time the Yen is becoming stronger, for reasons that have nothing to do with Lucent. This will create tremendous volatility (as we are witnessing right now), in the valuation of currencies and equities.
But again, one must establish goals first.
If you are going to "trade" Lucent continuosly, then you will have to monitor events that affect the currency markets, interest rates, Fed policies, IMF announcements etc. If so.. you may as well trade currencies, since, the capacity for higher leverage is far greater in the currency markets, than in the equity markets.
There is a thread here in SI that covers currencies, where there are very knowledgeable individuals expressing their opinions there:
Subject 20640
Follow the thread creator Henry, as he is very knowledgeable, lots of valuable information.
For a taste see this, and follow the link in it:
#reply-5968357
How is that for a theory ?
As for Lucent, I insist that the growth potential is considerable. Their international sales, at this time, represent somewhere between 20% to 25% of their total sales. I believe that these sales may increase in the future, both in terms of total volume and as a percentage of total sales.
In many instances, the Market reactions have little to do with the real economy.... The economy where people need to communicate with each other, send faxes, e-mail, video... Internet use.. etc. This is the area to research if one is to feel comfortable investing (do not read trading) in Lucent.
Please explain to me why LU 3-4 weeks ago was valued at 80 to 100, then it drop to 54 and change, only to return to 63 plus today......
Has the company changed in its real value so dramatically in its sales or ?.... profits perhaps ?
Or.... is the market suffering from fits and nervousness?
Huge funds in the brink of bankruptcy ? investors repatriating funds ? Who knows.....!?
Lot's of theories..... As they say,
"The greatest tragedy in all of history is the murder of a beautiful theory by a gang of brutal facts".
~ Anonymous.
The way I see it.... is The Fed has become in a way the central bank for the entire world.
The IMF is more or less the International Salvation Army for Banana Republics.
And as for the Salvation Army ?... This is what my friend Henry Louis Menecken had to say:
"The New Deal began, like the Salvation Army, by promising to save humanity. It ended, again like the Salvation Army, by running flop-houses and disturbing the peace."
Remember the story of the Christmas Ghosts?, same thing for Market crashes... (that is my opinion).
As I understand it, a falling dollar was part of the equation that contributed to the '29 and '87 crashes as well. Other factors, such as rising interest rates, are thankfully absent this time around.
Yeah well..... the amount of tools, media blitz, one liner pumps, PR campaigns and Bevis and Butthead mentality available and prominent these days, are weapons that back then they did not have, (as far as '29)....
All of which today not only are they available, but apparently they seem to work...
....and in 1987, I believe interest rates were around 9 % or so... compared to the 4.75% to 5.25 % today.....
Not to mention that there was no Internet in those days.... I do not imply that the basic rules have change... or "this time is different", I am only saying that the volumes involved are substantially greater.
In my eyes, the future continues to be bright. The stock will be higher... not on a straight line, but still higher....
Z. |
