Stronger Dollar Sounds Great, But May Not Be

Great if you are going on vacation to a foreign country. Food and wine will be cheaper. However, the issue is that the US doesn’t live by itself in global economy. The debt problems that were mentioned during the most recent broadcast (click here to watch), affects other nations as well. Read the highlighted text.

To make it worse, some of the borrowers produce oil. So do you think that Jae-Istan is likely to do anything to lower the price of oil now??? What would you do?

Do you know who cannot influence this?

  • The Federal Reserve, not even Jay Powell can directly affect foreign exchange.

  • POTUS. It doesn’t matter who occupies the Oval. Sorry, I will take the cost of borrowing over POTUS every single day, twice on Sunday. If you are assigning credit or blame to President [insert name], you are simply a citizen of Narrative-Ville, which is an inferior relative of Numerator-Ville.

Just In Case You Think I Am Inventing Stuff

I took the graph above, and turned it upside down. And then I put the S&P500 on top of it. My point, made throughout the year, has been that the US dollar has gotten killed early in the year, and interest rates were stable (ish). This supported risky asset prices, and then AI spiked it, from that point. However, now both are untrue. Both.

Takeaway: you can have all the earnings reports (or AI hype) you’d like, they are ultimately minnows in an ocean. For example, AI hasn’t decelerated one bit. If you don’t understand the big forces, then that can be okay, IF AND ONLY IF the environment is cooperative.

Don’t add and subtract before you multiply and divide. Don’t eat soup with a fork. Don’t …eh, you get the point.