Highs for the Stock Market, Lows for the Dollar

[Subdude]

U.S. Stocks Rally as Dow Hits 10,000 for First Time in Year

By Sapna Maheshwari

Oct. 14 (Bloomberg) -- U.S. stocks rallied, sending the Dow Jones Industrial Average above 10,000 for the first time in a year, on better-than-estimated earnings at JPMorgan Chase & Co. and Intel Corp. Oil climbed, while the Dollar Index slid to the lowest level since August 2008 and Treasuries fell.

“We’ve really moved in nine months from the threat of another Great Depression to a really powerful recovery,” said Burt White, chief investment officer at LPL Financial in Boston, which oversees $234 billion. “We’ve done that all in just a few months and that’s pretty astounding.

The S&P 500 has rebounded 61 percent from a 12-year low in March, leaving it 13 percent below its level on the day before Lehman’s bankruptcy filing intensified the financial crisis. The rally has left the index valued at almost 21 times the reported operating earnings of its companies, the highest level since 2004, according to Bloomberg data.

Dollar Slumps

The dollar declined against all but one of the 16 most- traded currencies tracked by Bloomberg, weakening to as low as $1.4947 per euro for the first time since August 2008. The Dollar Index, which tracks the currency against those of six major U.S. trading partners, slid 0.7 percent to a 14-month low of 75.48.

Yeah, I know 10,000 is just a round number, but the point is that at least movement is in the right direction for the moment.

Bloomberg link

[AtticaFlinch]

Yeah, I know 10,000 is just a round number, but the point is that at least movement is in the right direction for the moment.

Bloomberg link

It's a good thing GM and Citicorp were pulled off the DJIA in June.

[LTAWACS]

I should have sold C yesterday... ah well. It'll go back up soon enough.

[BryanS]

We need to see DOW 8,000. What is going on now is ridiculous.

1999 DOW 10,000.

2009 DOW 10,000.

1 Decade. 0% return.

Maybe bonds would have not been that bad after all...

DIVERSIFY.

[Subdude]

My guess is that the world is awash in dollars looking for a home, so dollar-denominated assets are rising in price. A couple of years ago it was real estate, last year it was oil and some other commodities, and this year it is the turn of gold and equities. I wouldn't be surprised at all if another real estate bubble develops, even after what has happened. This seems to make sense to explain an economy where there is simultaneous price deflation and asset inflation. And just like in all the previous bubbles, the Fed isn't going to want to stop the party when the economy is so weak.

[N Judah]

The Chron actually had a decent article on the subject:

http://www.chron.com/disp/story.mpl/editorial/6681847.html

The surging Dow's no accident. A weak dollar and a strong Dow are connected, the experts explain. Stock averages like the Dow mostly rise and fall on the performance of big corporations that operate internationally, and they're rising these days in some part because the dollar is puny. This gives American goods and services a welcome price advantage.

This is not really breaking news. According to the international investment bank Barclays Capital, dollar weakness has gone hand in hand with stock market rallies since 2003.

[BryanS]

We're doomed.

http://www.thetrumpet.com/index.php?q=3037.1530.0.0

But then in 1913 something changed, and the U.S. dollar started down a long, steady road of dollar devaluations. Using the U.S. government’s own figures, to obtain the same amount of purchasing power of $100 in 1913, you would need $2,038.38 today.

We invest in dollars. We buy stock. We buy bonds. But if the dollar becomes worthless - either by deflation or inflation - whatever the reason... then it won't matter. The "safety" of treasury notes, bonds, CDs will be all for not. Because everything, valued in dollars, will be worthless... eventually. $0.00.

Look at that. It's almost gone.

[Guest Michael B. Purdy]

Hey Subdude, I agree with you.