High unemployment + weak dollar is good for equity.

Discussion in 'Economics' started by noob_trad3r, Oct 6, 2009.

  1. I was told this is good for equity.

    High unemployment means companies can do more with less (better bottom line and margins)

    Government printing dollars, means debt is eroded because of inflation? so companies with lots of debt on the balance sheet can remove debt easier using increasing cashflow

    Weak dollar means multinationals make more money exporting to strong currency nations?

    I gusss this is why stocks are rallying? since the market is forward looking?
  2. jnorty


    Just more bullshit from wall street. in the 1990's wall street loved a strong $. also if a strong currency is bad why are the euro country's up the same as us?wall street will sell there mother to make people buy
  3. Typical Wall Street propaganda: It is different this time.

    Turning high unemployment into a positive sounds like their brand of lies.
  4. bgp


    yes, and so is a jobless recovery good for the stock market.

  5. wartrace


    Wait until the spin during earnings reports "Revenue is not important" will be the next theory we hear from Wall Street.:D

  6. Unemployment is high because demand is low. Margins aren't increased at all.
  7. The USA is done for. But BRIC countries will be demanding more which would increase the value of companies that export.
  8. nitro


    In a strange sort of way it is. But here is the right way to think about it, imo. Say you are a doctor and you have a patient that is a crack addict. If you instantly remove 100% access to the heroin from the addict, he could actually die from withdrawal. So you have to wean him from it sloooowly.

    The US system is in a similar state to the crack addict in the form of zero IRs. Because the FED has two mandates, one of which is "full employment", it has no choice but to flush the system with cash and low IRs. This means that every time they have an auction, all that money on the sidelines gets put into play into the bond market (any return is better than zero in a MM account), and any residual gets put into play into the stock market. In a twisted way, the crack of low IRs will continue as long as unemployment is high, hence supporting your thesis.

    So, the heroin is low IRs, which is a result of horrendous unemployment figures with what appears no end in sight, forcing money on the sidelines to chase yield. i.e., bonds and stocks.

    So, I agree with the statement, but it is a short term (less than two years) way of looking at things.
  9. zdreg


    it always ends bad. think germany in the 20's and argentina etc. and zimbawae.