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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: velociraptor_ who wrote (80648)	6/18/2002 3:44:45 PM
From: Crimson Ghost	Read Replies (2) \| Respond to of 99280

A falling dollar will help boost the profits of US multinationals as well domestic manufacturers who will garner more pricing power. HOWEVER, I question whether it will do much to help the stocks of these companies which remain very expensive for the most part. Not to speak of the VERY NEGATIVE impact on stock valuations of an accelerating outflow of foreign capital and major upward pressure on interest rates.

To: velociraptor_ who wrote (80648)	6/18/2002 4:33:49 PM
From: ahhaha	Respond to of 99280

The falling dollar is not bullish for stocks. Did you know that 30 years ago it was widely believed that a falling dollar was bullish for stocks? Then all of you were retrained or got trained to the "right" view. The problem is that what you've finally learned, is finally wrong. The last 10 years in the markets have invited billions and billions in foreign investments, not only in stocks but in bonds and treasuries as well. It's a common mistake to intermix these various quantities when that isn't the correct thing to do. The refactored dollars are on deposit at the Treasury, managed by the FED. That means those dollars have quite a different status than do those dollars invested in speculative dollar denominated assets. In any event the quantity of money in speculative assets being influenced by dollar movements is relatively small. None of this has any consequence however, because it doesn't matter a wit how much is flowing. It only matters what rational expectations are. That means it would take only 1 dollar to move the forex in the dollar 10 points, if conditions warranted. They don't warrant because the US has the highest level of economic integrity in the world. No? Japan and China are better? How about Europe? And after all, there is no safety in the dollar? Foreign nations are well-known for their ability to conduct the war against terror? No one believes that and certainly not the big foreign institutions holding dollars. A falling dollar makes all of that unattractive to foregin investors because it has an opposing effect on those gains as it lowers value. The stock market was falling like a rock when the dollar was soaring. Your above comment conveniently omits that fact. In a market that is already weak, the falling dollar further compounds the problem and encourages liquidation by foreign investors which adds selling pressure all around. What market is weak? The stock market is very strong because it isn't making any headway on the down side. It's doing a lot of snorting, but the meat isn't there. Trying to go short is impossible. Any trader trying to do so knows that, but they ain't talking. What you think is a strong stock market is rapidly rising prices. To me that's a weak market because price exceeds money flow. Quite the opposite is occurring now. Interestingly, a rising dollar is also not good because the DOW consists of many multinational companies and it is the DOW which has held the fort for the last 2 years. The DOW doesn't look any different than the Russell. A rising dollar in this case lowers the value of foreign dollars and thus lowers the revenue of those companies. What counts is unit volume of sales, not nominal representations of value, because you can't spend "foreign dollars"(sic) here. The stock market doesn't acknowledge a change of variables because it doesn't change value. You're confusing the results of bad economic policy which impact a country's currency with a change in currency price. During the mid '80s the dollar soared and there was no economic effect. During the mid '90s the dollar dropped like a rock and the stock market soared. It's a catch 22 with a cliff on either side. That's only the way you want to look at it because the stock market has been falling. If it had been rising, you'd twist your truth to fit that scenario. The only resolution is a stable dollar. The dollar is de facto stable. It is the world's reserve currency. Just how important do you think the dollar movements are? They aren't important at all because the fact of the dollar being the world's reserve currency forces the US to practice sound economic policy. The US is the controller of the dollar. This is what AG means when he says "our policy options are limited".