http://www.newsweek.com/id/220936 This article explains it easy for the Joe the Plumber. Lots of US companies are selling things to foreign markets made in those markets. And Companies know no borders, if the US dollar collapses, equity is still a better deal especially as the rest of the world moves on without us. So if the US collapses, Coke,GE,PG HQ's will just shift somewhere else. Just make sure to fill your suitcases with share certificates before you board that plane with the one way ticket out of the US.
duh, . . . is this some kinda revelation Eventually those dollar dominated and inflated U.S. shares won't be worth squat in real terms (Hmmm I wonder what the price is of Zimbabwe company stocks - how many quadrillion Zim dollars per share)
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.
Exactly on the money give - the man the prize. Another quote: "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." Well the Japanese economy has been dead for 20 years after all sorts of 'stimulus' and low interest rates. But they actually work their tails off, build things, and saved their money. The Ruskies bought into the 'Commie workers paradise' b.s. for 70 years, and now just let their mafia run everything. If we're somewhere in the middle of those two examples of stupidity - - - I'm guessing maybe 50 years for us ? Who knows.