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To: Jim Willie CB who wrote (116874)	4/19/2002 9:51:17 AM
From: kech	Read Replies (1) \| Respond to of 152472

Jim - generally a tight link exists between USDollar and USStocks I did a quick memory check on this correlation and came up with this one: Remember 80-82. Terrible time for the US stock market but US dollar was soaring. Both driven by rising US interest rates of course. Tom

To: Jim Willie CB who wrote (116874)	4/19/2002 10:02:08 AM
From: Wyätt Gwyön	Respond to of 152472

the reason a US dollar decline is bearish for US equities is straightforward: foreigners' US stock holdings will decline in local currency value, but worse, bond values will also decline. this will cause foreigners to sell US stocks AND bonds, thereby driving up interest rates. as interest rates rise, the PE multiples for stocks will decline. all of these factors are very bearish for US equities and bonds in the event of a dollar decline. the situation is exacerbated by the very high trade deficit, which foreigners may only care to finance at much higher interest rates if the USD falls. high interest rates are similarly bearish for the economy, as they will drive up mortgage rates, thereby reducing refi activity and perhaps causing weakness in the housing sector, which has been the main source of spending power for the consumer.