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Cross-Currents

Started by pkamm, 10/02/2007 09:46AM
Posted 10/02/2007 09:46AM Opening Post
Well the market's sure doing well the last few days. The dollar keeps sliding though. The dollar-slide is consistent with the commodities rally. But it is in conflict with the rally in the markets. And the commodities rally to the extent it's gone is now implying tremendous inflation pressure which is in direct conflict with the rally in the bond markets. Observations:

1) The commodity rally and the low bond rates are in conflict with each other. Either commodities must break, or bonds must break. Which turns out to be the case probably depends on whether or not we get a full-blown recession near-term.

2) The falling dollar would logically tend to suck the air out of both bond and stock markets. 1987 comes to mind, when the dollar fell and fell and the market rallied and rallied until it ran right off the cliff. Intuitively it would seem the energy for continued rallies must come from within our borders to supplant capital leaving dollar-based assets. However, offsetting factors (such as the benefits to U.S. manufacturers' exports) may be coming into play in evaluating future earnings potential. Might this be especially true of high-tech exports (or would it be less true, due to foreign-manufactured components becoming more costly to domestic manufacturers??)
Posted 10/05/2007 11:32AM #1
Looks like the dissonance is being broken by today's jobs report. Stocks and precious metals are rallying and the bond market is selling off sharply.