DOW reaches 10,500.....something going down right....

[opihimoimoi]

Keep smiling..its all a bad dream...vitality is forth coming

[Warpy]

1. You don't think it's real, do you?

I don't.

The fall in the dollar has more to do with the rise in the Dow than any other factor. It's certainly not a sign that happy days are here again because they're not.

[global1]

3. Help Me Understand Why A Falling Dollar Makes Dow Go Up........

I just came back from a 2 week trip to the Netherlands and Germany and got killed on the exchange rate. Everything costs about 1/3 more. One euro is approximately equal to $1.50. So a breakfast I had at the hotel I was staying at for 24,00 euros actually cost me about $36.00. That's crazy. This doesn't help the travel industry. I didn't see many Americans in Germany. If fact some American companies pulled out of exhibiting at the meeting I attended. Cost too much. The reason for them to exhibit is to gain new European customers so they can sell their wares. Not being able to step up to the plate doesn't do much for our economy or jobs. One would think that if you can achieve sales across the pond where the exchange rate is in their favor that this would stimulate some activity in U.S. companies that manufacture here. But the falling dollar is making it cost prohibited from actually doing any selling over there.

[MercutioATC]

4. Dollar falls = U.S. goods cheaper in other countries = increased sales of U.S. goods.

Plus, you get a bunch of foreign tourists coming here and spending money because of the favorable exchange rate.

[AllentownJake]

6. No it means the Dow adjusts to the price of the currency

and speculation on what the currency will be worth. When the dollar is rising with the DOW, call me.

:facepalm:

[MercutioATC]

8. That's also an element, but a lesser one.

...and that said, if ANYBODY can logically explain how the market has been running for the last 12 months I'll buy them lunch.

This has more to do with insiders squeezing the squeezings than it does with either foreign trade or the state of the dollar.

[AllentownJake]

9. I think the amount of money sitting on the sidelines is more telling

More people are hiding in safe things, and entities are betting with money that they never earned to begin with.

[MercutioATC]

12. That's what I find most alarming.

Granted, policy is being written by stupid officials elected by a stupid electorate, but the wholesale chicanery has become blatant.

This isn't an example of "hard times", it's an engineered liquidation of the system.

[AllentownJake]

14. Yep and a Democratic President is sitting there quietly as it happens

FDR seized their Gold and handed them dollars.

[MercutioATC]

15. Jake, I'd look at running for the border if I were you.

Hell, I'm retiring out-of-country as soon as I'm able (a little over 6 years).

Sometimes discretion really IS the better part of valor.

[AllentownJake]

16. I'd rather die in the country my family came to in 1729

Than retreat. That being said, I'm not planning on marriage or children for a while.

[MercutioATC]

18. You very well might...prematurely.

I know you're somewhat idealistic, but that will wane.

Just remember what I said (well, Shakespeare said it first). There are times that discetion is the better part of valor.

[dgibby]

22. My nephew and his wife just retired in Mexico.

It's nice to know I have somewhere to go if I need to.

[MercutioATC]

23. Good for them.

When things so bad, I think they're going to do so quickly...so I believe some degree of self-sustainability will also be necessary regardless of geographic location.

Out of the country, remote, and prepared would be a great place to be.

[Bigmack]

17. Two things...

1. Do we still have "US goods"? Seems to me that we just sell each other latte's. An exaggeration, sure, but there's truth, too.

2. I see a lot of foreign tourists where I am. We are now the "Mexico" of Europe.

[MercutioATC]

19. Agreed on both points, but this isn't about reality...it's about numbers.

We actually Do export. True, we import way more than we export...but our exports DO become cheaper to buy.

...and those tourists are spending money, "boosting" the economy....of course, not as much as the declining dollar erodes it, but you're supposed to be grateful regardless.

[Statistical]

21. US is the #1 largest industrial power in world, and #3 largest exporter.

The idea that US only makes lattes is a fun urban legend but not based in reality.
The industrial output of US is greater than that of #2 (China) & #3 (Japan) nations Combined.\

US is major exporter or
aluminum, refined petroleum products, coal, industrial chemicals, civilian aircraft, military weapon systems, nuclear reactors, locomotives, telecom equipment, networking equipment, semiconductors, autos, automotive parts/engines, and pharmaceuticals.

US doesn't make cheap consumer goods. Likely never will again. However $10 toys in Walmart is the not sum of world industrial output.

[Bigmack]

27. Sounds like you have solid numbers.... but....

how does that relate to the numbers for the previous decades? Aren't our manufacturing numbers falling precipitously?

The crack about lattes was hyperbole, but I do think of the Great American Manufacturing Engine as missing on a few cylinders and low on lube and not turning out the rpms that it used to.

I also worry that the industrial output you mentioned needs a highly trained workforce, and I don't see much happening in the schools to indicate they are preparing that kind of force.

[Statistical]

28. Actually industrial output has risen in every decade (including 2000s).

We now have an industrial output about 25% HIGHER than the 1960s.

However industrial employment has fallen.

How is that possible? Productivity gains.

Each worker can simply produce a magnitude more than they did in the past.

Sadly while industrial output has grown it has grown slower than productivity gains so there are continued job losses in industrial sector.

Unless productivity gains slow and/or industrial demand grows faster this will continue to happen indefinately.

Same thing happened to farming in the last century. At one point 70% of labor force in this country was farming. Today we produce much more output but a tiny fraction of labor force is in farming.

[Warpy]

5. The falling dollar makes US stocks look like bargains

to people with Yen and Euros to spend. Once the dollar is propped back up, they'll sell everything and take their profit via the currency exchange.

Remember, the investor, especially the institutional investor that is driving the current rally, is only interested in making a paper profit as quickly and with as little risk as possible. Investing in stock artificially cheapened by a falling dollar is low risk.

That's what's driving the Dow.

While I sympathize with reduced travel expectations, those have nothing to do with the psychology driving the Dow so far above 10,000.

(US manufacturing would be in fat city now, if we still had any to speak of. Our products would look very attractive if we still made them)

[JVS]

7. But that does indicate a couple positive things.

Investors who do that are betting that a) the dollar will come back up, and b) the stocks will not decline in dollar terms

[Warpy]

10. They'll all dump their stock in a New York second

if it looks like the Dow is going down significantly, driving it below what it was in the early part of the year.

Either way, this rally is an illusion.

Oh, I get a kick out of looking at the portfolio online these days, it would be glorious to be a rich bitch.

I just know I'm not. I'm just lucky enough to have the income to live on.

[JVS]

11. Yes, if it goes down they will. But it still represents a bet that those things improve a bit.

[Statistical]

20. The exact opposite is also true.

US exports look damn cheap by comparison.

Say Westinghouse builds nuclear reactors and their build cost is $4B US when $:E exchange rate was $1 = 1E.
So Westinghouse priced their reactors at E5 billion. That netted them $5B US and they made $1B profit.

Now Europe has competing reactor companies and supply/demand keeps the price stable.

Now Westinghouse sells a reactor for 5BE and collects $7.5B US - $4B in costs = $3.5B in profit. To make more sales they can undercut European competitor and sell a reactor for more like E3.5 billion = $5.24B -$4B costs = $1.25B profit. Lower price, more market share, and still more profits.

low dollar = bad for US consumer
low dollar = good for US exporters

[TwilightGardener]

25. I wonder if the dollar stays low, will that help improve manufacturing job numbers?

[Statistical]

26. It certainly can't hurt them.

Despite the hot air about "strong dollar" policy the Fed is pushing dollar weaker. It helps exports. Looks like rest of world will recover faster and as they do they will need goods/supplies. Weak dollar in early part of recovery should help US exports.

Bad news is there is no free lunch. Weak dollar means higher consumer prices, and higher oil/energy prices which will eventually strangle recovery. Also low term low dollar will lead to higher inflation and higher carrying cost on US debt (something we can't afford).

So Fed will HAVE to raise rates and force dollar higher but short term (next 6-12 months) weak dollar could put US exporters of early cycle goods (industrial equipment, autos, chemicals, agriculture, precision machinery, infrastructure providers, comidity exporters, etc) in a good position to undercut rivals, growth demand, and increase employment.

[GodlessBiker]

2. I think the stock market reflects what people and institutions who buy and sell stocks think ...

the economy will be like in 6-12 months.

It's not a reflection of how things are now.

[DBoon]

13. the rest of us are getting poorer

so that the owners of american business can get richer

[Orsino]

24. Dow going up means They can still steal from us. n/t