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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (8380)	2/20/2004 1:46:33 PM
From: ild	Read Replies (1) \| Respond to of 110194

Date: Fri Feb 20 2004 12:52 trotsky (Hambone) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i KNOW you didn't say that. that's why i'm telling you that you have cause and effect confused. CURRENTLY, a strengthening dollar causes the stock market to weaken ( probably on account of the fact that a stronger dollar amounts to a monetary tightening and lessens multinationals earnings potential ) , and a weaker dollar causes it to stregthen. down the road, the view that a weak dollar is 'good' for stocks will probably give way to worries about what the weak dollar's OTHER economic/financial effects might be, and a too weak dollar could then become the cause for a weakening of stocks. the stock market is big, but the currency market is 100 times as big - iow, it's not even remotely conceivable that the currency market's actions depend on what the stock market does - it is most definitely the other way around. Date: Fri Feb 20 2004 12:35 trotsky (Hambone) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved 'seem to want to have it both ways' - no, i don't. i cited the '87 crash merely as an example for a broad market illiquidity hyper-volatility event - by definition, a SHORT term event, and what happens during it. like i said in my previous post, it does not matter whether this happens in a bull or a bear market, and the July '02 example is just as good an example, if you don't like examples from the 1980's. w.r.t the dollar, you have cause and effect confused. the dollar isn't rising BECAUSE the stock market is falling - it's the other way around - at least right now, in the short term. if you don't believe it, pull up a few 10 minute chart overlays, the cause-effect chain should be more than obvious. Date: Fri Feb 20 2004 12:21 trotsky (Hambone) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved at the time of the '87 crash, gold was in a cyclical bull market along with the secular bull market in stocks. the crash is definitely a very good example for what happens when stock market liquidity dries up, after all, the gold price actually went UP during it. still, the gold stocks plunged along with the rest of the market, as they have always done in such situations, and with 99,99% confidence will always do. the most recent example of an outsized plunge in gold stocks along with a general market dump/liquidty problem is July 2002 btw. - iow, it doesn't matter whether gold is in a bull market concurrently with a bear market in the broader stock market, the illiquidity based sell-offs happen anyway. Date: Fri Feb 20 2004 12:11 trotsky (Hambone@dollar) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i think it's going to happen the other way around - i.e., the dollar will eventually fall so far or fast or both, that the stock market will begin to worry about it and follow it down. in the short term, weakness in the stock market coincides with dollar strength and vice versa on almost a day-to-day basis actually. what happened in the 90's is not relevant w.r.t. the current situation, especially not the short term situation. as i said, the negative correlation between the SnP and the dollar has even been stronger than that between the dollar and gold over the past year. and since you're talking about what will likely happen in the near term regarding the stock market, you'll have to incorporate the recent correlation history , not that of the 1990's.