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dow breakes 13000, dollar still falling - 4/25/2007 7:45:27 AM

aviinterra

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Watching the dollar nosedive has almost made me cry and wonder why I did not keep some euros while I had them ( stupid! stupid! ). We have lost 50% of our currency value since 2001 ( or something like that ), and yet according to Bernake, we are all doing just swell- let's just ignore the soaring prices, the inflation, and the fact that $100 means almost nothing. Lettuce should not cost 1.99. The Germans are surpassing our economic growth, we are at 3.3%, they are 3.4%. Does not seem like much, but add to the fact that the EU has favorable interest rates and all investors are heading that way, it does not look good. And no one is asking for another pact to save the dollar such as the Louvre Accord. So, I guess amid all this ranting, the question is- are we ready to wheelbarrow our money to the grocery store? Or are there some optimists still out there?
Edited for silly spelling

< Message edited by aviinterra -- 4/25/2007 7:46:15 AM >

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RE: dow breakes 13000, dollar still falling - 4/25/2007 10:24:43 AM

selfbnd411

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A weak dollar helps our exports. It's half of the reason that United Technologies, Boeing, Caterpillar, Pepsi, and Coke are doing so well. The other half is that these companies are just flat out producing superior products compared with anyone else out there. We can't have the dollar fall too far because it hurts our ability to service the national debt, but there is a bright side.

Inflation is not a real problem, and here's why. Yes, prices are up. But the inflation we're experiencing is beyond the ability of the Fed to control. We're seeing commodity inflation driven by global consumption, and the Fed's normal tool to control inflation (rate hikes to slow the economy) is virtually powerless to control, say, oil demand in China or India. The Fed could control this inflation, but only by raising rates so high that it destroys the global economy, curbing consumption of energy and basic materials.

Food inflation is being driven by the Bush administration's policy choices. They're fishing for corn-belt votes by forcing us to consume more grains to be used for the ethanol boondoggle. That drives up feed costs for meat and raw costs for other items. Witness the "tortilla riots" in Mexico--corn costs so much that tortilla prices are escalating beyond the reach of the average Mexican. Let's not forget that California recently experienced HUGE crop loss as a result of bad weather as well.

The Fed does need to cut interest rates soon, though, because there's nothing to be gained from rates at current levels. The reason for higher rather than lower rates was the housing bubble and inflation. The housing bubble has burst, and inflation is not controllable by the Fed. The danger is that the Fed, in trying to control phantom inflation, will leave rates too high, causing unemployment to rise and leading to a recession. This Fed has proven intransigent, however. They may just keep rates artificially high in an obstinant attempt to defend the theory of inflation targeting. Time will tell.

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RE: dow breakes 13000, dollar still falling - 4/25/2007 2:46:58 PM

LadyEllen

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A falling dollar will make your exports cheaper in overseas markets - in theory you should sell more.

More importantly, a falling dollar will make imports to the US more expensive - in theory this should help US manufacturing, increasing employment in that activity and creating true wealth (not so called wealth as produced by the shuffling of paper).

The real impact though is in the world outside the US, where so much in the way of trade and services is priced in USD.

E

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RE: dow breakes 13000, dollar still falling - 4/25/2007 6:12:06 PM

Sinergy

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quote:

ORIGINAL: selfbnd411

A weak dollar helps our exports. It's half of the reason that United Technologies, Boeing, Caterpillar, Pepsi, and Coke are doing so well. The other half is that these companies are just flat out producing superior products compared with anyone else out there. We can't have the dollar fall too far because it hurts our ability to service the national debt, but there is a bright side.

What exports?

Sinergy

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RE: dow breakes 13000, dollar still falling - 4/25/2007 6:35:43 PM

selfbnd411

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quote:

ORIGINAL: Sinergy
What exports?
Sinergy

We still export quite a bit. Boeing's 787 Dreamliner is wiping the floor with Airbus. United Technologies and General Electric dominate the jet engine market. Caterpillar makes the giant machinery that's driving the world's construction/mining/drilling boom. Everyone still wants to drink Coke or Pepsi and smoke Philip Morris cigarettes.

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RE: dow breakes 13000, dollar still falling - 4/25/2007 10:17:52 PM

Termyn8or

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selfb;

You sound like someone who knows economics quite well. I don't want to hijack the thread but I have a question. This is a bit off thread, but I am quite curious. I have my own theory, and the eye I cast on the stock market is quite derisional. But that is not the subject. Stocks, bonds, investments, all notwithstanding.

Real property. Now to actually isolate this is not as easy as it seems, but it can be done.

The theory :

If you completely isolate market forces and any changes from the valuation of real estate, you can get a true picture of the value of a dollar.

I realize what this means and I know it is not easy. I mean even with a dollar-stable market value for the oceanfront property in AZ, when nothing has changed and it is a remote location, values can fall do to declining interest in purchasing it. To get the clear view of it you must also disclude positive market factors, such as the horizontal expansion of urban areas. The closer they get, the more you get.

I dunno how much you're into math, but by disclude I mean to negatively factor in positive influences on the property value. Like I said it is not easy, but I bet someone is doing it. Look what happened in Telluride, Colorado.

What I am saying is that if we can see the PURELY intrinsic dollar value of a property increase for no good reason, what we are really seeing is the decline of the currency.

I said this is not easy, there are offsets for natural disaster, all kind of crap. The list is almost endless. This is probably in the realm of the best actuaries in the world. However, my plans tend to be quick and dirty.

I would now submit the theory that if we can isolate the factors with the most impact on the answer we seek, we can learn something. There will always be an error factor, and sometimes instead of trying to eliminate it, all we need to do it identify it.

Of course that logic requires people to look for possible new influences before they have a chance to act. Not to stop them, but to adjust our tactics. New influences are very unlikely to be under our control, that is a given.

But I remember the song "I'm addicted to a dollar that ain't worth a dime". Actually a dollar is worth about a nickel, ½ a dime, and probably less now. That was like 2002.

So here's the deal, they used to say another day another dollar. If the dollar was worth a dime, you would have to make how much ? But then it is not worth that much anyway.

I was the proud owner back in 1975 of a car that cost $9,983 in 1970. I knew because the crass ass left the sticker in the window. Now to isolate the intrinsic value for that car is not that desirable to persue, rather let's isolate it in relation to a new car. Given the times and the advancement of tchnology of course one expects new features. In line with the times, well air conditioning was standard on the 70.

How much is $10,000 in 1970 dollars compared to today's dollars ?

So you see the dilemma, which way do you think into this, from this side or that side ?

The point is, ON topic actually, that I do not necessarily see the Dow increase as a good thing.

T

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