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>oh yeah, if there's not a fob (friends of bill) fix in, then kindly
>explain the dow for the last 2 days. flight to safety? hardly.
>>TJ
Could be, but here's another possibility. The Dow is heavily weighted
towards big multinationals, whose sales prospects overseas have been beaten
up badly lately, causing them to be sold off. However, the dramatic fall in
the US dollar has suddenly made the products of these companies much more
price competitive in foreign countries in their local currencies. This has
caused the Dow to outperform the rest of the market the past few days. This
would also explain why the Nasdaq is getting crushed. Companies like Dell
are not only not helped by the falling dollar (small overseas sales), but
are actually hurt. A lot of the components in their computers come from
Asia, and they are now going to cost more in dollar terms.
The good news is (to beat the dead horse a little more), very little of this
is going to affect the US economy AS A WHOLE in the long run. If the dollar
keeps falling, you just have to shift your portfolio towards the exporters
and the companies that compete heavily in the US with foreign competition
(namely autos, as long as interest rates don't go too high). Some sectors
will underperform, others will outperform. This is the benefit of a
balanced economy.
The falling dollar also helps the third world significantly. Many of these
countries have debts that have to be re-paid in dollars. These payments are
now falling. Most of these countries are still heavily dependent on
commodity exports for their economic growth. Since most commodity sales are
done in dollars, the price for these products has dropped, and demand will
therefore rise. Even though your wheat chart shows the price rising over
the past couple of weeks, it has actually FALLEN for the rest of the world.
Amidst all the gloom and doom, here's two things to think about:
If hedge funds were in such bad shape, why did a disciplined, long term
investor like Warren Buffet offer to buy 100% of LTC? Is it possible he saw
some significant value there for a patient investor (with cash to meet
margin calls)?
If the economy is on the verge of collapse, why were auto sales up 6% last
month? Why would people take on a long term financial commitment like that
if the economic outlook was so grim? Is it possible people are just saying
things are bad because it's the "politically correct" thing to do, even
though they see no hardship heading towards themselves?
Bruce
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