Wait a second, when something costs less it sells more.
Posted on 10/14/2009 4:28:39 AM PDT by expat_panama
[snip]
In case anybody checked, the dollar's path has been steadily downward since the early years of the administration of George W. Bush. And, notwithstanding the bleating you hear about the battered buck, that's just fine with Wall Street.
According to Barclays Capital, "since 2003, dollar weakness has gone hand-in-hand with equity rallies." The bank's economists estimate currency depreciation helped to reduce the trade deficit, which added 1.1 percentage points to gross domestic product growth in the first half of 2009 from a year earlier.
From the stock market's perspective, Barclays Capital notes in its U.S. Portfolio Strategy weekly letter that more than 30% of revenues for Standard & Poor's 500 companies come from abroad. Thus, dollar weakness boosts earnings of large, U.S. multinational corporations through increased competitiveness and positive currency translation effects, as foreign revenues are converted into a greater number of shrunken dollars.
[snip]
Barclays expects dollar weakness to persist in the months ahead, which would support the cyclical rally through year-end, it says. Bad news for the buck is good news for stocks. Booyah!
That underscores why, for all the angst the dollar's decline has produced, it has failed to upset the stock market ("October Crashes I Have Known (But Not Loved)," Oct. 9.)
[snip]
At the same time, notices of the dollar's demise seem premature. It's popular to compare the U.S. with post-war Britain in terms of the dollar being supplanted as the global reserve currency, as sterling was after World War II, when U.K. was all but bankrupt from fighting two world wars.
[snip]
(Excerpt) Read more at online.barrons.com ...
Looking forward to paying for breakfast with that Tera-Buck note.
It is not the dollar weakness that has helped stocks, but the low interest rates. The weakness of the dollar should have no effect on stocks unless stocks make their money internationally. It is the low interest rates that are making investing in stocks more appealing.
Having Americans investing abroad should make protectionists pleased but my bet's nothing will ever make them happy.
From the article: "Barclays Capital notes in its U.S. Portfolio Strategy weekly letter that more than 30% of revenues for Standard & Poor's 500 companies come from abroad."
Wait a second, when something costs less it sells more.
I wish more people would have said that when W let the dollar crash. Economic gains that result from a weak currency are the equivalent of an accounting trick. It's all smoke and mirrors.
How come inflation's lower now than it was a few years ago when the dollar was stronger?
Only if the demand stays the same...and if financing is available.
That caught my eye too. Makes sense though, the goods we sell are cheaper just as stocks in companies that make those goods are cheaper.
OK fine; when a foreigner picks out a stock on the NASDAQ, how does this 'make their money internationally' change the demand and financing?
Because they are still paying the same price for our goods in their currency, our companies are making a much higher profit margin on those sales. This helps boost their bottom line and the perceived value of the company driving up the price.
I doubt there are any good numbers on who, or where the money for stocks is coming from. You got a report, from one company, most likely one or two guys at terminals that found some data that looks like a pattern and reported it.
Who knows.
It is like a General getting a report from a GI in a frozen fox hole that he heard German voices in the night.
No they're not. Cheaper dollar, cheaper prices for our goods and stocks and foreigners buy more of both.
Oh no, if you are a gold bug, you can pay at the grocery store with bullion or coins.
Very few understand that a strong dollar makes imports cheap and exports expensive. A weak dollar increases the cost of imports and drops the price of exports.
It is two sides of the same coin. Regardless of the value of the dollar, there are advantages and disadvantages.
People should know, however, that for the last two decades, the dollar was kept intentionally high by Japan, China, and Europe to fuel their exports, keeping domestic manufacturers at a disadvantage in the international market.
For now, as US interest rates remain near zero while other nations raise theirs and they do not have the money to invest in the dollar to keep it inflated, it will continue to decline in value.
deflation is like being in the eye of the hurricane. Watch out for the eyewall coming from the opposite direction.
Isn’t it remarkable how well the market has been doing since summer, when the FBI urgently helped Goldman Sachs recover its stolen proprietary market manipulating (errr, “program trading”) software from that rogue Russian-name analyst?
Stock prices go down relative to their currency, but in most cases the price of goods stays constant in their currency. In economic theory the price might go down, but in reality, if they priced the car at 20,000 euro's, it stays at 20,000 euro's regardless of what the dollar does. I-Phone stays at 200 euro's regardless of the dollar.
| Foreign-owned assets in the United States, excluding financial derivatives (increase/financial inflow (+)) U.S. securities other than U.S. Treasury securities | |||||
| 1980 | $5,457 | 1995 | $77,249 | ||
| 1981 | $6,905 | 1996 | $103,272 | ||
| 1982 | $6,085 | 1997 | $161,409 | ||
| 1983 | $8,164 | 1998 | $156,315 | ||
| 1984 | $12,568 | 1999 | $298,834 | ||
| 1985 | $50,962 | 2000 | $459,889 | ||
| 1986 | $70,969 | 2001 | $393,885 | ||
| 1987 | $42,120 | 2002 | $283,299 | ||
| 1988 | $26,353 | 2003 | $220,705 | ||
| 1989 | $38,767 | 2004 | $381,493 | ||
| 1990 | $1,592 | 2005 | $450,386 | ||
| 1991 | $35,144 | 2006 | $683,245 | ||
| 1992 | $30,043 | 2007 | $605,652 | ||
| 1993 | $80,092 | 2008 | -$126,737 | ||
| 1994 | $56,971 | ||||
It's with the BEA'S balance of payments.
Stock traders buy with the money they got, and while Americans buy stocks with dollars, foreigners buy them with foreign money. People tend to keep very good records on how much money comes and goes.
Whenever a theory doesn't match with reality it's time to come up with a new theory.
fwiw, the news just in is that compared to last month export prices are flat and import prices are up 0.6%.
Foreign money invested in dollars is not how it works because foreign money's only good for buying foreign stuff.. What changes exchange rates is whether our inflation is more than their inflation which makes foreigners demand more bucks per funnymoney notes..
I was referring to the other nation’s banks buying dollars outright and sitting on them, to keep the dollars in circulation down...thereby raising the dollar value.
The Japanese, especially, did it on a regular basis. It devalued the yen while inflating the value of the dollar.
How do you arrive at that?
Dunno how things are in Panama, but here in the States, grocery items are going up in 10-20c increments almost every month. A year ago a can of Wally World corned beef hash cost $1.06. Today they want $1.44. Their great salsa was $1.50, then $1.70, now $2.00 for a lesser amount. Same goes for a lot of their canned goods. Other stores in the same area are the equal or worse.
Ah, you're talking about other country's national banks attempting to manipulate the exchange rates. OK, they try to do it but it's hubris and they usually fail. There's been a lot of talk about the Chicoms having done it but I still think when government's try to fight the free market they're just f@rtin' to stop a windstorm. Never happen. There's alway some Soros type to prove them wrong.
Donno about your personal grocery bills but America's a lot bigger than Wally World corned beef hash. The US has over 300 million people buying and selling things every day and what's happening goes far beyond the checkout counter that you're looking at.
We have to think about the whole country in order to make any sense about what nationwide prices are doing.
How do you arrive at that?
Ah, just my off hand recollection that protectionists always seem to be permanently unhappy and always fighting to have bad news --but I could be wrong. In fact, my being wrong on this would make my day ;-)
We live in “snowbird country” and I’m hoping some Canadian that’s dumb enough to want a second resort home in California will come in and snap up my late parents’ home...that’s currently our only hope.
waiting for the crack-the-whip effect to see where everybody will land should be interesting and horrifying to say the least.
You need to remember that if you sell land to a foreigner and you use any of the money to pay energy bills, then you’re enlarging the trade deficit. Not that I care, but it’ll mean some freepers will accuse you of treason or something ;-)
So far so good (Dow Dances With 10,000 on Earnings).
Enjoy it while it lasts.
They also allow their national banks to pump out more currency and decrease interest rates to accomplish the same thing.
All three methods have been deployed over the years to keep the dollar high.
http://www.forcastglobaleconomy.com/subscribers/Currency_Gold_Updates/CurrencyGoldUpdate05_11_12.htm
Great, so based on your point, why don’t you advocate that ALL American business relocate to Mexico or India where they work their people in sweat shops so you can enjoy product X at a cheap price, right?
He!!, we don’t need more jobs in America or Manufacturing for that matter, silly me.
Right people, everyone think about Daily's question: why are we not telling all American companies to relocate to Mexico?
Anyone? Take a guess even?
Since most of my food comes via the checkout stand, it's a viable observance. That was my experience in checking stores as we visited relatives - 6,000 mi round trip this summer and I made a point to check prices out as we hit 15 states in all. It was the same everywhere. Food prices up and anecdotal evidence confirmed it. Since you apparently don't eat food, you're not so aware of it. Give some examples of prices dropping please, excluding houses. :-)
Some years back Brazil calculated part of its inflation rate on the current price of black beans in one particular state. When that price started to inflate, they rushed trucks of the stuff to deflate the price. The U.S. govt. is more sophisticated - they just lie about it.
You and I are in complete agreement on the fact that governments try to control the market. I'm just saying they don't succeed, but maybe we're just talking time frame here like how the Soviets put on the appearance of controlling markets for seven decades.
The prices you've seen are actual prices and nobody can say that it hasn't happened. We all matter.
“The weakness of the dollar should have no effect on stocks unless stocks make their money internationally”
who in earth told you that?
as the dollar weakens, more money moves from dollar-based financial instruments into stocks. stocks start to look like better bets to retain a relative level of value compared to the dollar.
the reverse is also true. a weakening/cracking stock market means capital flows into the dollar for protection.
right now, the greater protection is in the stock market.
dont give any financial advice, ever! you just messed up a huge basic!
Oh good, another bubble.
How do you figure that?
How do you figure that?
Now I understand, I thought you were asking about the end of the sentence. OK, here's the sequence:
| 1. | With the cheap dollar Americans are selling things to foreigners (from the article: "...more than 30% of revenues for Standard & Poor's 500 companies come from abroad"). |
| 2. | Americans get paid with a big pile of foreign money which they can use to either buy foreign goods or buy foreign stocks. |
| 3. | We're not using that funnymoney to buy foreign goods so it won't put more US jobs into steel containers that get loaded onto outgoing ships. |
| 4. | We're buying foreign stocks, getting even with all those foreigners who've been buying up the US and taking over our corporations. |
So what's not to like?
looking forward to that breakfast bailout.
I agree that those ploys can’t be kept up forever, and in Japan’s case, their efforts eventually came to naught.
Enjoyed the chat.
I don’t know. Correlation is not causation. Besides, I’m not a big fan of the notion of being able to write a code that would work. Values to be ‘plugged in’, would be approximations. Writing the formula, the variables, then the code.....er. It would be junk. I doubt it.
I don’t think that you can time the market. It is too variable, any pattern that ‘worked’ would be found out.
What percentage of a US mutual funds, is dollars from foreigners? How would we know that? What about stock trading by hedge funds, trusts, lawyers. Where does their money come from? If UBS trades, is the money from it’s US clients, or foreign clients...and so forth.
Governments, some, print very nice reports, based upon what’s given to them.
Can’t say I agree with all of that but I appreciate your explanation. Americans should invest here but if the returns are poor I guess they will go abroad
Since you like foreign investing so much go buy some Aussie gold mines. The currency is appreciating too like crazy. Oz is more of a commodity play than Canada whose currency is also up but not as much
Oz is the Canada of the Pacific ... right near all those commodity hungry Asians
cheers!
Then it's just some of the gov't reports you accept, like the ones about the dollar trading at a lower exchange rate. Me too; the way I pick good reports is I check how they put their numbers together. You must have a different method.
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