With stocks and the dollar on a see-saw, there are only three possibilities to choose from.
Since the stock market is in the news (perhaps as a result of trillions of dollars/euros/yen/yuan/quatloos having suddenly vanished from millions of accounts), it seems timely to examine the key correlation between stocks and the U.S. dollar. As I have often noted here, this "big picture" correlation is a simple see-saw: when the dollar is scraping bottom, stocks are at their highs, and when the dollar is up then stocks are tanking.
At the risk of alienating chart-averse readers, I've marked up the charts of the S&P 500 (SPX) and the U.S. dollar index (DXY).
For those who aren't going to look at the charts, what they suggest is that there are really only three possibilities in play:
A. Stocks go up and the dollar drops to new lows
B. Stocks fall and the dollar rises significantly, a pattern that has repeated several times since 2007
C. The see-saw breaks and stocks and the USD rise or fall together.
The key to the relationship between stock valuations and the dollar is corporate profits. When the dollar declines, then U.S. global corporations' overseas earnings--now roughly 60% of total profits for many big global corporations--expand as if by magic when stated in dollars.
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2 comments:
But the Euro is not worse off than the Dollar, due to spending habits of the United States compared to the E.U. This crisis will eventually separate the classes into a Rich or Poor type scenario.Want to invest your money into something that will really benefit your family in the future? Try the following: Chickens, rice, candles or oil lamps, silver or gold for trading and Whiskey for pain.
What is being done deliberately with the U.S. Dollar is a crime against all the other Countries in the world! It is the reserve currency for Pete's sake. The only super power in the world got the priviledge of the reserve currency - it was a spoil of WWII.
Now the private bankers at the Fed have taken it upon themselves to print the darn thing into oblivion. It is absolutely criminal.
Americans cannot stop it. We are too ignorant of the truth and too much under the power of propaganda. We do not realize that our own sons and daughters are killing people around the globe in order to maintain this reserve currency status. WE have become a scourge upon the earth!
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