Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21
Investing in Google Deep Mind AI 2021 (Alphabet) - 6th Apr 21
Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns - 6th Apr 21
Staying Out of the Red: Financial Tips for Kent Homeowners - 6th Apr 21
Stock Market Pushing Higher - 6th Apr 21
Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending - 6th Apr 21
Editing and Rendering Videos Whilst Background Crypto Mining Bitcoins with NiceHash, Davinci Resolve - 5th Apr 21
Why the Financial Gurus Are WRONG About Gold - 5th Apr 21
Will Biden’s Infrastructure Plan Rebuild Gold? - 5th Apr 21
Stocks All Time Highs and Gold Double Bottom - 5th Apr 21
All Tech Stocks Revolve Around This Disruptor - 5th Apr 21
Silver $100 Price Ahead - 4th Apr 21
Is Astra Zeneca Vaccine Safe? Risk of Blood Clots and What Side Effects During 8 Days After Jab - 4th Apr 21
Are Premium Bonds A Good Investment in 2021 vs Savings, AI Stocks and Housing Alternatives - 4th Apr 21
Penny Stocks Hit $2 Trillion - The Real Story Behind This "Road to Riches" Scheme - 4th Apr 21
Should Stock Markets Fear Inflation or Deflation? - 4th Apr 21
Dow Stock Market Trend Forecast 2021 - 3rd Apr 21
Gold Price Just Can’t Seem to Breakout - 3rd Apr 21
Stocks, Gold and the Troubling Yields - 3rd Apr 21
What can you buy with cryptocurrencies?- 3rd Apr 21
What a Long and Not so Strange Trip it’s Been for the Gold Mining Stocks - 2nd Apr 21
WD My Book DUO 28tb Unboxing - What Drives Inside the Enclosure, Reds or Blues Review - 2nd Apr 21
Markets, Mayhem and Elliott Waves - 2nd Apr 21
Gold And US Dollar Hegemony - 2nd Apr 21
What Biden’s Big Infrastructure Push Means for Silver Price - 2nd Apr 21
Stock Market Support Near $14,358 On Transportation Index Suggests Rally Will Continue - 2nd Apr 21
Crypto Mine Bitcoin With Your Gaming PC - How Much Profit after 3 Weeks with NiceHash, RTX 3080 GPU - 2nd Apr 21
UK Lockdowns Ending As Europe Continues to Die, Sweet Child O' Mine 2021 Post Pandemic Hope - 2nd Apr 21
A Climbing USDX Means Gold Investors Should Care - 1st Apr 21
How To Spot Market Boom and Bust Cycles - 1st Apr 21
What Could Slay the Stock & Gold Bulls - 1st Apr 21
Precious Metals Mining Stocks Setting Up For A Breakout Rally – Wait For Confirmation - 1st Apr 21
Fed: “We’re Not Going to Take This Punchbowl Away” - 1st Apr 21
Mining Bitcoin On My Desktop PC For 3 Weeks - How Much Crypto Profit Using RTX 3080 on NiceHash - 31st Mar 21
INFLATION - Wage Slaves vs Gold Owners - 31st Mar 21
Why It‘s Reasonable to Be Bullish Stocks and Gold - 31st Mar 21
How To Be Eligible For An E-Transfer Payday Loan? - 31st Mar 21
eXcentral Review – Trade CFDs with a Customer-Centric Broker - 31st Mar 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

The US Dollar Falls whilst Stock Markets Rise - A Major Market Disconnet

Stock-Markets / US Stock Markets Apr 25, 2007 - 11:58 AM GMT

By: Money_and_Markets

Stock-Markets

Sean Brodrick writes . Right now, there's a major disconnect in the markets — the U.S. dollar is going down while U.S. stocks are going up .

Look at my weekly chart of the dollar. If this were a stock, we'd be talking about a potential bankruptcy!


Why is the dollar in the dumps? My coworker Mike Larson posted a good explanation to his blog, Interest Rate Roundup :

"The U.S. Fed is afraid to raise rates, despite the fact inflation is well above its stated comfort zone, because the housing market is in the toilet. Meanwhile, both economic growth and inflation is surging overseas. So, foreign central banks are hiking interest rates … As a result, capital is migrating to foreign countries and away from the U.S. dollar."

That's pretty darn negative! And it begs the question: How can stocks be hitting new highs when the basic unit of trust in the American economy, the dollar, is careening into the gutter?

Well, if history is our guide, this shouldn't be happening! In a recent issue of his Black Swan Currency Currents , my good friend and crackerjack currency trader Jack Crooks charted the dollar vs. the S&P 500 index …

As you can see, the dollar and U.S. stocks used to trade in tandem. But no longer!

Here's what Jack has to say about the situation,

"It's interesting to see such a dichotomy, or decoupling, among major asset classes in the same country — both of which are supposed to express some degree of confidence in said country.

"For one, [this decoupling] is telling us relative to the value of the dollar, based on the US dollar index, stocks have NEVER been more expensive ."

That's another pretty bearish view! Personally, I'm more sanguine when it comes to America because I think the world's largest economy has more resiliency than a lot of people realize.

But here's the point: If you're invested solely in U.S. stocks and dollar-denominated investments, this is a crucial juncture, and it's not easy to say which direction things will head next.

That's why I'm glad to be following the natural resources markets. Why?

Even If the U.S. Falters, Asia Can Pick Up the Economic Slack

I could argue that this is already happening. The TREMENDOUS demand we're seeing out of Asia for commodities of all types — energy, precious metals, uranium and more — combined with an ocean of global liquidity, is probably enough to keep commodity prices and select commodity stocks humming along no matter what happens in the U.S.

Remember, commodity demand from Asia is enormous and growing. China is the world's #1 user of copper … steel … and zinc. And it's becoming a bigger and bigger buyer of gold, silver and uranium. India is right up there, too.

What's more, mining and materials stocks are in a merger-and-acquisition frenzy. Last week I told you about Paladin's potential takeover of Summit Resources. Well that's just the tip of the iceberg!

For example, Algoma Steel Inc. became the latest Canadian company to agree to be bought as Essar Global, India's third-biggest steelmaker, pitched woo. And Ipsco Inc., North America's second-biggest maker of steel pipe, is also in takeover talks.

These companies — who have a very good handle on their businesses — aren't paying top dollar for the competition because they think prices are about to go down!

Maybe they read the IMF's World Economic Outlook, which came out in April 2007. It said the world economy should grow at a robust 4.9% in both 2007 and 2008. And it indicated that this rate should hold even if oil goes up to $75 per barrel!

One last thing to consider: Natural resources like gold and silver are priced in dollars — so as the dollar goes down, they usually go up!

In other words, those with a more global perspective … as well as those who diversify their portfolio into precious metals … could not only survive a bear market in the U.S. …. they could thrive.

And let me tell you …

There Are Plenty of Other Reasons To Be Bullish on Commodities

A strong global economy, and particularly intense demand from Asia, is playing a role in rising natural resource prices. But there are other forces at work, too.

Let's look at a few …

In crude oil, Mexico's big oil field is tapping out! From January 2006 through February 2007, Mexico's supergiant oil field, Cantarell, lost a staggering one-fifth of its production. And in March, Cantarell's production fell by ANOTHER 5%.

In fact, the Wall Street Journal reports that Cantarell is fading so fast that Mexico may become an oil importer within eight years. Mexico is our second-biggest supplier of imported petroleum, below Canada and above Saudi Arabia — accounting for more than 11% of our imports. We could feel the squeeze from Cantarell as soon as this summer. More and more analysts are calling for $4-a-gallon gasoline this summer.

For gold , production is falling around the world. It's falling in South Africa, the U.S., Australia, Peru, Russia and Canada! And that's despite more spending by miners and rising gold prices.

Plus, investment demand is exploding! Exchange-traded funds have made it easier than ever for U.S. investors to buy gold, and two gold ETFs just made their debut in India.

These are two of the forces I named in my Dow Jones MarketWatch article,
"7 Reasons Why Gold Should Surge," and there are more than that!

The proof is in gold's chart. You can see that it pushed above the high it set in February, came back to test it and is now taking off again. I think we're on the way to $750-an-ounce gold.

Then there's uranium, where supply just can't keep up with demand. In fact, some analysts say mine production won't catch up to demand until 2017 — if then! We're looking at a 10-year bull market in uranium, minimum.

Heck, maybe that's why the New York Mercantile Exchange (NYMEX) recently signed an agreement to introduce uranium futures on its electronic platforms next month.

I could go on and on about all the very bullish stuff. I haven't even touched copper yet … or told you how U.S. steelmakers are laughing off talk of a recession.

Bottom line: For natural resource investors, the current market disconnect is something to be aware of, but not something to worry about.

If the U.S. economy keeps trucking along, and the U.S. dollar recovers, Americans have more money to buy things and commodities go up. And if America falters and Asia stays in the lead, commodities will still go up. Talk about a win-win situation!

Yours for trading profits,

By Sean Brodrick

P.S. If you want to profit from China's megatrends, you might want to check out my new Red-Hot China report. It will tell you about five forces shaping China and the global economy, as well as three stocks and three funds to play those trends. It's an $89.95 value, but for a limited time, you can buy it for $49.95. To find out more,
CLICK HERE .

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.MoneyandMarkets.com


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules