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.
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