Be careful...it is now being reported on CNBC that there is an article out there citing sources within the FED that they are
*much* closer to raising rates than anyone thinks. I believe that they will engineer the end of the bull market anyday now. The G7
is meeting today and it is expected to issue a strong statement on the dollar and its wish to push the dollar down by both the
FED and Japan. There is currently a lot of foriegn money in the US markets because of the rising dollar...if you remove that
piece of the puzzle and then raise interest rates you will see the foriegn money flee faster than it came in.....that could very
well be the catalyst that noone has been seeing......
As I said before Alan Greenspan called this market "irrational" when it was 7,000. He chooses his words carefully and does
not just forget about them because the market went up. On the contrary, he is more concerned than ever and does not want to see
the type of depression occur here as happened in Japan. He is going to stop the market NOW. This week. First they took out the
circuit breakers, then they issue G7 release to weaken the dollar, then they hike up rates, and the next thing you know the DOW is
2,000 points lower.....GUARD YOUR PROFITS. Markets do NOT go up forever.........best of luck to everyone....
By the way, did you see the internet stock CMGI, run from 91 to 102 1/2 and back to 85 in just 2 days???? that is a massive reversal top, and the first of many to come in the internet stocks, IMHO........;^)
BFRD and everyone who views these messages for good info, I apologize because BFRD is absolutely right. I neglected interest rate parity. Domestic rates in comparison to foreign rates - of course one would want the higher rate hence the stronger currency in demand for the higher rate. I'm sorry dudes.
Intryu - You are 1/2 right and you are mixing apples
and oranges with your explanation. The BOND market
does NOT work in parallel with the CURRENCY
Yes, when rates increase the bond values drop, BUT
the dollar (most times) becomes stronger compared to
other currencies when rates increase. There are many
factors that go along with this like the inflation rate,
import/export trade factors and the strength of a given
I hope you're not trading currencies (commodities)
with your insight. You better stick to bonds because
you have that on right on. Example,one reason (and
there are many) the FED lowers rates is to reduce
our trade deficit buy making dollars cheaper and thus
our exports more attractive. Don't argue, call a currency
broker tomorrow and check it out. If he/she agrees that
lowering rates increase the currency value of the dollar
compared to other currencies, give me their phone number
because I want to talk to them.
I apologize for my rudeness. Let me try to explain one more time.
In general, monetary and fiscal policies that raise US interest rates "relative to foreign interest rates" tends to cause the dollar to appreciate. This happens because investors are constantly comparing returns they make from investing in different countries. This return incorporates the interest rate as well as the "expected" exchange rate when the investment matures.
The highest return, let's say the US, draws large capital flows, increasing demand for dollars and causing them to appreciate. This capital inflow is eventually offset when the appreciation of the dollar outweighs the benefit of the higher interest rates. With the dollar viewed as being "expensive" now, investors believe that the dollar will depreciate more over the life of the investment than the higher interest rate will compensate them. This is what is called "interest-rate parity".
Your statement: "The dollar gains when rates go down (bonds up)." Reflects the events that occur once investors are attracted to US interest rates on a "relative" basis. This is the result, not the cause of the strong dollar. Your right, the higher demand will cause TBonds to increase in prices and interest rates to drop. This is the mkt adjusting what are perceived to be high "relative" returns in the US compared to other investment and bringing capital flows back into equilibrium.
I hope this was a little clearer than my previous post.
I still don't understand what you meant by this though:
"And if you are short AMZN, I forgive you for being stupid even though I wish there were less of me out there." Less of you out there?
Take heart Willie! A fellow I know, who loves computers and books (5 book christmas present to me) (extensive library) and very knowledgable con computers recently recieved a $5 coupon from amzn on the net.
He checked it out. On a couple chess books he wanted. 4-6 weeks delivery. Went to barnesandnoble.com 2 days he had his books.
Better price. coupon ended in f-13.
Did I miss something about the G-7 meeting today? I interpreted Rubin to mean that we were to join the Japanese in streghthing the Y. We will sell $ along with Japan's central bank, thus supplying more $ to the =.
an Amazon board and the future of internet buying will be impacted by shopping search sites like junglee that find prices, delivery, options, etc. for internet shoppers. I tried about ten book titles on Junglee and Amazon had good prices and better selection and delivery than its on-line competitors. I'm short and this was disturbing. -willie
Canstic - I agree that raising interest rates may be
negative to the market, but it should be bullish
for the dollar since the dollar (and bonds) bear a
higher return. Explain if I'm wrong. Thanks.