Dollar Falls In Value
http://www.bloomberg.com/apps/news?pid=20601101&sid=aeJULGcO6S18
The dollar reached a 14-month low versus the euro as stocks advanced around the world on confidence that the global economy is recovering, increasing demand for higher-yielding assets.
Brazil’s real and Mexico’s peso were the biggest gainers versus the dollar among the 16 most-traded currencies tracked by Bloomberg. The South Korean won was the best performer among 10 emerging Asian currencies as the nation’s economy grew at the fastest pace in seven years.
S&P500 Overvalued
http://www.bloomberg.com/apps/news?pid=20601087&sid=aXTcHEJFiNQk
The U.S. Standard & Poor’s 500 Index is about 40 percent overvalued and headed for a drop as central banks pull back on securities purchases that pushed up asset prices, according to economist Andrew Smithers.
Declines are likely because banks will need to sell more shares to raise capital, the economist and president of research firm Smithers & Co. said in an Oct. 23 interview at Bloomberg’s Tokyo office. The closing price on Oct. 23 of 1,079.6 was 40 percent above 771.14, a level last seen in March, according to data compiled by Bloomberg.
“Markets are very vulnerable to an end of quantitative easing,” said Smithers, 72, who recommended avoiding stocks in 2000 just as the U.S. benchmark entered a two-year bear market. “Central banks, they’ve got to stop some time and if that happens everything will come down.”
Central banks from the Federal Reserve to the Bank of England last year embarked on unprecedented measures to flood credit markets with cash in order to rescue the global financial system from the worst crisis since the Great Depression.
Those purchases may be nearing an end, said Smithers, who worked for 27 years at S.G. Warburg & Co. where he ran the investment management business.
The upshot of all this is that things haven’t turned around yet. We’re still experiencing increases in unemployment, the dollar is weakening, and the stock market is overvalued and will correct downwards sometime in the future.
Accurate information is worth a lot, and I’m doing my best to make sure you have the facts instead of the politically-motivated pablum that PresBo and Congressional Dems want you to believe.
The dollar is staying low because the administration simply adopted Bush's plan of getting business for America....with a cheap dollar. It's the twentieth item of the Bush years that Obama repeats.
ReplyDeleteIn large part, yes. But this can't go on forever. As the dollar falls, those who hold the public debt get nervous and want higher interest rates. As the interest rates rise, we get a lot of other economic effects. As long as they keep the dollar low by printing tons of it, the economy won't tank... but they can't play that game forever.
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