Wacky market?

Discussion in 'Economics' started by garfangle, Nov 12, 2003.

  1. Someone explain this to me...

    During the 90s the US had a v. strong dollar (v. other currencies/gold) and we had a highly bullish market. Since this spring the dollar has fallen dramatically, yet the market has been one of the strongest in recent memory (year over year +50% in the Naz). So, why is a weak currency good for the US, yet bad for Latin American economies (see Argentina)?
  2. Election cycle...nothing matters during it,,check out past 40 yrs on SP. You will be very surprised. esp May 1970-to-Nov 1972 -- nonsenical..yet mkt rose whole time. Avg gain in the cycle is 44%.

  3. Many people would like for you to believe that their are certain relationships in the market that are subject to "hydraulic effects." I wish that was the case because it would make trading and modeling a whole lot easier (and less profitable). These relationships (interest rates/yield curve/dow/Xrates/Paris Hilton/etc) are at best guided by anecdotal evidence and rules of thumb. To build a model based upon these parameters gets tougher and tougher everyday because the mathematics involved is highly technical and the people working on this prob have big budgets, Phds, and lots of time.

    If you don't have that type of background I would stick to rules of thumb and standard academic models. I would only trade when things are working out normally and stay out of the markets when I was uncertain about the dynamics unless I had a strong gut feeling and some experience to back it up.
  4. Garfangle,

    Some people, especially US exporters, and US manufacturers of exported goods, and also US Administration believe that weak dollar is good for US economy.

    Weak dollar means cheaper US exported goods, and in turn, will create more demand, assuming the purchasing power of those who imported the goods stays at least the same.

    More demand, means more production in US. More production means more revenue for US manufacturers. More production also means more demand of labor. However, this would do good only for labor-packed industries. Those with less labor may not benefit a lot in rise of manufacturing activities.

    Bush administration, I think, actually favor weak dollar, despite their chiming of 'strong dollar' policy.

    Hope this helps.
  5. Most times are unique.

    Use a symmetry of history (Danto, Columbia) to help yourself out.

    Fortunately, the prognosticators in all the shops just create these spheres of influence for their worlds. They vie with each other and mostly market noise (trading periodicities) is created instead of direction.

    Your currency question seems to devolve around two separate opinions (your dollar/market analogy is of the same ilk as well) At any time you are subjected to partial information and you may think you have a basis for getting to a position or viewpoint. Not really an objective likelihood.

    A way around this is to find out what is the context that you need to have to do well (intellectually and in making money). Most market (making money) considerations cannot be intuited.

    I am currently interested in learning how the future of economics is going to operate with an electronic based global exchange of data sets. I am looking forward to economics driving the world scene rather than war power, diplomacy or any other traditional alternatives. When global corporations interlace the scene, we will see wealth created at an unprecidented pace.

    As time passes each block of time is filled with unique and pervasive new situations. The pace ever quickens as well.
  6. A lower dollar benefits the revenues and earnings of a lot of huge multi-national names in the S&P 500 and the Dow Jones, like IBM, MRK, GE, etc.

  7. Yes it does, but also forces those who finance our massive deficits to find better returns elswhere..and forces the Feds hand to tighten..choking a fragile recovery...

    Food for thougt, especially after trading off one bubble (equities) for another (debt)...recall the summer rate backups...largest move since 1987....FED is hiding those problems for now

  8. after a deep bear market, returns off teh bottom look dramatic.. i.e +50% for the naz... but its more corrective, prices were abnormally low
  9. One word...Voodoo Economics!
  10. A strong dollar during the 90's was not the deciding factor in the stock markets gains. Falling bond rates, a high tech boom and fairly good fiscal and trade policies engineered this growth.

    The dollar is down since March and the market has risen. Give credit to uncle Al for proping up the market. I don't know what net foreign purchase of stocks has been since march, but the US public has obviously outweighed any foreign selling in the last 6 months.

    There have been many other periods in which the dollar falls while stocks go up (mid 80's for example).
    #10     Nov 15, 2003