Posted on 10/15/2009 4:46:17 AM PDT by JohnRLott
With the Dow Jones Industrial Average reaching 10,000, Americans are feeling wealthier.
Unfortunately, roughly a third of the increase simply reflects the falling dollar, that American goods and assets are becoming cheaper to the rest of the world. Just as a lower dollar makes it more attractive for foreigners to buy American goods, it also makes it a better deal for foreigners to buy stock in American companies.
Over the course of this year, as the value of the dollar rose until the beginning of March, the stock market fell. As the dollar fell during the rest of the year, the stock market rose. While the stock market has risen by about 49 percent since its low in March, the dollar has fallen by about 20 percent against the Canadian dollar, 17 percent against the Euro, 15 percent against the Mexican Peso, and 11 percent against the Japanese Yen. For each of these currencies the dollar peaked right when the stock market hit its lowest value.
Figures 1 and 2 are available here and here. . . .
(Excerpt) Read more at foxnews.com ...
“Just as a lower dollar makes it more attractive for foreigners to buy American goods, it also makes it a better deal for foreigners to buy stock in American companies.
Er, when you buy an American company, you buy a stream of cash flow in dollars. You might pay less in Euros, but you get less in Euros - unless the dollar strengthens in the future.
Mr. Obama is making me rich. I am heavily into commodity base stocks, and he is trashing the dollar and the country. Great for my stocks.
Only downside, when I am rich, will he hit me with windfall taxes to finance his socialist schemes?
Looking for someone with a Bloomberg terminal to compare the total return on the DOW to the DXY.
Sounds like the best way to broadly compare the dollar devaluation in the last decade.
Why do you think you need to cash out in the monetary unit of the country you live in?
The stock market has gotten too far out in front of this alledged recovery. I wouldn’t want to be one of the dunderheads who buys stocks at these prices.
Did anyone do an analysis of the volume yesterday?
Any idea where the big bets went?
Any shorting in the works?
Good article, by the way.
Another way to look at it is: we first hit 10K in 1999.
So after all the ups and downs, we’re back to where we were 10 years ago.
Too bad the banks are hiding their failed mortgages. If they did, home prices would drop to where they were something like 10 years ago, and people could actually afford them.
Too bad the dollar doesn’t have the purchasing power we had 10 years ago.
Too bad we don’t have the unemployment we had 10 years ago.
And it’s too bad that Slick Willy — in panic mode as the tech bubble burst that his illusion of “8 years of peace and PROSPERITY” — CREATED the housing bubble for the sake of his own image...which contributed greatly to the economic mess we’re in.
Of course, the mess won’t go away until we restructure our entire banking system. But that won’t happen until we end the fed.
How many pay dividends denominated in Euros or Yuan or Yen?
I have to admit, I've resisted the temptation to get back in, even into bonds, and even though my employer matches, as I'm afraid it's about to become another black hole.
Exactly right. Recall the book “Dow: 30000”? While that was silly, at the time (before the mortgages and federal debt got absurd) there was indeed some hope that the market would go up to a genuine 15,000 or 20,000. So as you say, we are barely back to where we were a decade ago-—and at some point, this HAS to be in inflated dollars when all these deficits catch up. Don’t know when.
“But that won’t happen until we end the fed.”
Which is why I LOVE this song/video. (Warning-foul, but appropriate language)
http://www.youtube.com/watch?v=-6Fpoebz2LE
I thought that the S & P is way down?
I guess we’ll see. I sold just about everything I had that was at a profit two weeks ago. I am just not confident in this administration, and I’m waiting for the big sell off.
America on sale.
We’ll make a very innovative and productive colony for somebody down the road, after the Baraqqis are flushed.
That is Awesome! Thanks!
But that is exactly what is happening. Just now, people I know are thinking about getting back in. Some are buying the lie that the recession is over. Now they see the DOW is over 10,000 and greed is starting to kick in.
They never learn. These same people panicked and sold when the market was way off, fearing a further crash.
EVERYBODY knows to buy low and sell high. It is human nature and human emotion that most people in reality buy high and sell low. They panic and sell low, then get greedy and buy high.
This is why dollar-cost-averaging is so useful for your ordinary, every day dolt who doesn’t understand the markets,s doesn’t study, can’t manage risk or pay attention to his intellect over his emotions.
Many dunderheads are just now getting back into the market and will loose another massive swipe from their 201(k)s in the next market drop. Sad and predictable. Stupidity rarely goes unrewarded.
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