piezoe
Registered: Jan 2006
Posts: 2258 |
11-03-09 11:31 PM
Kinggy, There is always a media explanation, whether is has anything to do with reality --well, you be the judge. In the present case the market has gone up practically none in constant dollars, well perhaps 200 points, or so, since the Devils Bottom. The entire article seems like nonsense to me, because the market has not gone up, not much anyway.
Now if they wanted to explain why the market has gone up a good bit in nominal terms they need look no further than the US dollar.
Since the Devils Bottom, the market has simply traded with the dollar. Try this. Overlay, for example, the S&P onto say the EUR/USD. It is immediately obvious. what's going on here. Why should this be? Well there are a number of reasons. The market, as a discount mechanism, may be said to be discounting future inflation. Or if you don't like that explanation try this: foreign earnings, when converted to dollars ooze up as the dollar slides down. (I think that's what the author was trying to get at but was apparently unable to get his thumb out of his ear.) And there are other reasons too, such as US stocks getting cheaper in foreign currencies which attracts swarthy foreign buyers as the dollar slithers lower, and blah..blah, blah.
But bottom line. It's the dollar, Blanche.
When the EUR/USD blipped up over 1.50 last week the EUR/USD promptly began to fall. Why? Intervention I suppose -- the way friends intervene in a drunks life when he has hit the skids. And, of course, as the dollar strengthened relative to the Euro, the market fell.
Maybe eventually the market will actually go up some in constant dollars, that is if we ever get out of this recession and start producing something other than wars and airport scanners. But who knows when that might be? We might all be dead by then.
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