198 replies to this topic
Posted 31 January 2005 - 02:47 AM
Buddha, you're in fine form.
MH and beardrech......wow!
This looks obviously very bearish. Fannie.......head and shoulder deluxe pattern.
"I know the human being and fish can coexist peacefully"____George W. Bush, 7/29/2000
Posted 31 January 2005 - 02:53 AM
"Long-term, the correlation coefficient of US stocks to the US dollar is almost exactly zero."
I dispute this. Overall, there -is- virtually 100% correlation.
Between 1920 and today, the dow is vastly higher. I don't have a chart in front of me, but isn't it 100 to 1 ?
Between 1920 and today, the doolar has lost 95+ % of its value.
Thus, the inverse correlation is very strong.
Notwithstanding the above, I have no idea if there is any actual -connection- between stock-price and dollar; or if it's just an arbitrary coincidence. But over the past 80 years, they surely have moved in an inversely-correlated fashion.
In regards to commodities....
People often confuse stocks and commodities, especially technicians; because they look identical on charts. However, they are -fundamentally- different.
A stock or bond is nothing but a paper asset. Its price can be anything, and can easily go to zero.
However, a commodity has a -real cost- of production. Its price can NOT fall below this actual cost of production....except possibly for brief periods of inventory reduction.
Further, the CRB is a misleading index, in that it groups industrial commodities with food commodities. They are inherently different, and in my view, should not be grouped together. Industrial commodities are -optional- to life; whereas food is -essential-.
In a massive global depression, the consumption of industrial metals etc. may well fall by a factor of 50%, or even more; whereas, the consumption of foodstuffs is highly unlikely to drop by even 10%.
Further, the "physical-plant" for food production (soil, water, etc) is deteriorating at an alarming rate. Simultaneously, population (demand) continues to grow. Yet further, energy, which is 35% of the total cost of industrial-scale food production, continues to increase.
It is HIGHLY likely that food-commodity prices will increase from this point.
As far as industrial-commodities are concerned, my own view is that a global recession among industrialized nations is imminent; thus leading to a sharp fall in prices of most industrial metals, timber, aggregates, etc..
Posted 31 January 2005 - 08:08 AM
Dozer- Butterfield's comment and the ensuing discussion was re the DOLLAR INDEX, which is the dollar's value relative to other currencies, not with regard to its purchasing power. There IS NO consistent correlation between the value of the dollar against other currencies, and the performance of the stock market. Historically, they move together, more often than not.
We are not idiots. We all know the dollar has lost purchasing power in general terms.
That is beside the point which I was trying to make.
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