U.S. Dollar

Answering client questions on the economic recovery, bull market upside, valuations, Main Street and what could go wrong?

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Much of the upward price movement in commodity prices, as measured in U.S. dollars, is the result of the weak dollar. A weaker dollar has an inflationary impact on U.S. prices.

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Performance results make a case that a declining dollar may be more favorable to large caps than small caps.

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Study shows market performance not too bad over six periods when dollar is declining…..Which groups also perform in such an environment?

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Is this a bear market? It certainly is a bear market in integrity! Steve presents the case for both Bears and Bulls.

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On June 22, clients received an Interim Memo noting that our composite Major Trend Index had slipped to Negative status. The subsequent calculation lost a few more points and remains marginally negative.

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Thermal pollution time…Steve Leuthold’s 1996 views (and 1995 reviews) on stocks, interest rates, economy, dollar, deficit, earnings, alternative investment areas and, yes, the Super Bowl.

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Soft Landing? Better fasten your seat belts...the odds are against it. Is the sun setting on the U.S. dollar as a world reserve currency? Also, how gold is still disappointing its fans and a look at one of the ways your Social Security tax is spent.

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Greenspan's comments about the possibility of lower short term rates and orchestrating a soft landing ignited the bond market and stocks followed suit, with several market indices hitting new highs.

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Major Trend moves deeper into negative territory...Commodity Diffusion Index move above 70% does not inspire us either.

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U.S. corporations must pay almost 300 basis points more to borrow in U.S. dollars than in Swiss francs. Why is there such a difference?

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The dithering dollar. Did we miss our golden opportunity? Some think there is current hope for Social Security reform. Is new NASDAQ rule an uptick or upchuck? The bears are howling.

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The bond market is looking increasingly vulnerable. The economy appears to be deteriorating, inflation is nowhere in sight and short rates are declining. With all this going for it, why is the bond market stagnating?

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My current view towards long bonds from an institutional investor's point of view is to sell some now and sell some more when longer term momentum slows.

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Politics and the Stock Market...Fiscal Reform the Hard Way...What's Up With Gold (Not Much except a Weak Dollar)...Eskom (South Africa's Electric Utility) Bonds: A 20% Yield with Some Risk As Well

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In early May, the bond market was hit hard by a post Treasury financing sell off. It spent the rest of the month recovering.

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The surge so widely advertised in the press and in financial circles primarily reflects a loss of investor and speculator confidence in Europe, not massive new respect and confidence in the U.S. dollar. Also, for the U.S. investor in German bunds or other European bonds, there are really two sets of currency considerations, the specific European currency and then the U.S. dollar.

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This month, the Conventional Asset Allocation Model has added to its holdings of German government bunds, taking them up to 18% of the model’s assets. Normally this would be a subject for this publication’s “Foreign Investments” section. However, the considerations involved in making this investment decision should be of broader client interest.

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Forget about the economy, forget about the uptick in the CPI, and forget about the bulge in bond supply. U.S. interest rates rose in November because the dollar went down.

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The bond market edged tentatively higher in the first half of August, but lost it all in the last two weeks of the month. T-bonds made new lows for the year in the last days of August.

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