When will the one way weak US$/buy stocks trade fracture?
As stocks and commodity prices move higher again in response to another move lower in the US$, at some point there will be some differentiation in stocks between those companies with a large % of overseas exposure (and don’t see a margin squeeze from rising commodity prices) that will benefit from the weak $ and those companies who are more reliant on the US consumer that will get crimped by rising food and energy prices on top of a difficult labor market. Gasoline and crude futures today are rising to a one year high, corn is near 4 month highs, wheat is at a 2 month high, soybeans are near 2 month highs, sugar is near a 28 year high, and cocoa is at a 30 year high. Of course these are just futures prices and there is an obvious lag to when the changes show up in consumer prices but the trends bear watching. The average gallon of gasoline yesterday in particular, according to AAA, is at a 7 week high at $2.60, a .10 away from a one year high.
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October 21st, 2009 at 12:04 pm
When indeed? Never? DGDF? Carry on Trading?
Seriously, you would have to say that gasoline prices are rising to a level that would affect consumer spending.
October 21st, 2009 at 1:13 pm
Oct. 29 at 3:30pm?
October 21st, 2009 at 1:49 pm
New toy for gold traders. Now you can see when gold moves are due to the gold market and when they are due to the US$ malaise.
Today it is the dollar’s fault:
http://www.kitco.com/kitco-gold-index.html#RT
October 21st, 2009 at 1:55 pm
As soon as the USG starts taking away the punchbowls. Then both, the USD and equities will trade in tandem.
October 21st, 2009 at 2:20 pm
Well, you guys are smarter than me. But the earnings season-this time- seems to be a story of cost cutting and getting rid of inventory rather that truly having increased sales. (I realize that some companies are increasing slightly from the trough)…
…But if the story really is the weak dollar, what if the weak consumer doesn’t jump in here and start getting back on the debt bandwagon? Could equities suffer even if the dollar doesn’t strengthen?
October 21st, 2009 at 2:31 pm
@ Bruce
I’ve been saying all along that the rise in equities is a fairy tale. Like you said, cutting costs and reducing inventory. Then there’s the fact that the analysts have taken their expectations down so low for most of these companies that it’s damn near impossible for them not to beat them. Eventually, I see the USD and equities trading down in tandem. Has nothing to do with smarts, just logic and common sense.
October 21st, 2009 at 2:45 pm
@ Pat G.
When the USD and equities trade down in tandem, what do you see oil doing? Will it still be a weak dollar safe haven as now, or will the fundamentals of weak demand pull it back down?
October 21st, 2009 at 3:18 pm
@ skysurfer
I see money going back into oil for as you say “a weak dollar safe haven”. The Saudi’s like it at $80 and our refineries cut back on production (now around 80%) to support higher gasoline & distillate prices. Greed. Some of this shit we actually do to ourselves. But that’s just my opinion.
October 21st, 2009 at 8:25 pm
dont you guys know the first rule of trading… never go against the trend… just like oil going from 120-140 was retarded .. so is the current move.. but the trend following programs rule today’s market and they dont care about fundamentals (oil, equities, FX, GOLD).. go against them at your peril… too bad for investors that those programs have no problem dumping everything at once …
oh well
PS – I think banning trading would make the markets much less volatile and keep prices closer to fair value (which is their ultimate role, to allocate resources) but its never gonna happen.. until then the markets are just a game, even more so in today’s climate