|Dow||-332.78 to 17,662.94|
|S&P 500||-35.26 to 2,044.17|
|Nasdaq||-82.65 to 4,859.79|
|10-YR Yield||-.069 to 2.126%|
|Gold||-$6 to $1,160.50|
|Crude Oil||-$1.32 to $48.68|
The Mexican peso just hit an all-time low of 15.63 to the U.S. dollar. Or in other words, one dollar now buys almost 16 pesos — up from around 12 just a couple years ago.
The Turkish lira just hit an all-time low of 2.64 to the dollar.
The Indonesia rupiah just hit a 17-year low of 13,105 to the dollar.
The Norwegian krone just hit a 13-year low of 8.08 to the dollar.
The Brazilian real just hit a 10-year low of 3.17 to the dollar.
And of course, our “friend” the euro just hit a 12-year-low of 1.07-and-change to the dollar.
The broad Dollar Index (DXY) has now jumped by 23 percent over the past eight months. That’s the most aggressive rise in more than 34 years! By some of my indicators, the buck is more overbought and overextended now than at any point in modern history.
Just look at this weekly chart of the DXY. You can see from the orange RSI line at the bottom that we’re even more overbought now than we were at the depths of the 2008 credit crisis. That crisis caused an immense flight-to-safety rally in the buck, along with the biggest rally in U.S. Treasury prices ever.
|Click chart for larger version.|
So what’s the problem? Isn’t a surging dollar simply a reflection of our relative strength as a country vis-à-vis the rest of the world? That’s the textbook argument you’ll hear in some corners.
The problem, as this Bloomberg story notes, is that the dollar rally is getting out of control.
It has morphed from a positive signal of U.S. strength to a broader, negative force. Its rally is now broadly pressuring emerging markets, hurting commodity prices, and undermining the profits of multinational U.S. corporations.
Or in simple terms: As the dollar flies, commodities and emerging markets cry!
Now I’ll be the first to admit that I’ve missed the last couple cents in this euro decline. I jumped off that train a few weeks ago. But I simply can’t stomach jumping on this incredibly extended move here. Sorry.
For one thing, I recently said I expected to hear and see more “verbal intervention” aimed at capping the dollar rally. The chairman of the White House Council of Economic Advisers, Jason Furman, just warned in a speech today that the dollar’s rise would hurt U.S. growth. Those are the kinds of comments I expect a lot more of — and soon!
|“The bargains in select foreign currencies, stocks and bonds are getting too juicy to pass up.”|
For another, the bargains in select foreign currencies, stocks and bonds are getting too juicy to pass up. Buying into the panic in Russian assets in late December and early January recently paid off handsomely in one trading service I manage. Now I’m increasingly drawn to some of the hardest hit other countries that everybody now hates with the white hot intensity of a thousand suns. Brazil is a prime example.
In fact, I wouldn’t be surprised if we don’t soon see actual anti-dollar intervention by one or more central banks. Certainly the level of panic we’re seeing in select markets like Turkey is similar to levels that in the past have triggered a policy response. That’s especially true now because problems in the foreign markets I mentioned earlier are now impacting our domestic stock indices!
With that in mind, are you attracted to foreign bargains? Do you think this dollar rally is getting out of control? What do you think policymakers will do in response, if anything? Are you planning on booking a trip to Paris, Mexico City, or Rio de Janeiro now that it’s getting so cheap? Use the Money and Markets website to share your thoughts as soon as you can!
|Our Readers Speak|
Will the Apple Watch bring in hordes of buyers just like the iPod and iPhone did before it?
Reader Bud W. isn’t buying that line of thinking. His rather pithy response: “I think that for the time of day, I’ll just look at other people’s watches and save the $350 or more. Of course, I could get a wearable sundial.”
Reader Bill S. was skeptical too, highlighting one key potential weakness. His comments: “The 18-hour battery life is going to be a huge problem, and I am surprised that they didn’t solve that problem before the rollout. I am sure they tried, so there is probably no solution.
“I love Apple and have been riding it all the way up but I think this is a mistake …maybe a huge mistake. They probably need to cool it for a while and enjoy their success.”
On the other hand, Reader Phil predicted that Apple will have a lot of success as watch applications gain in popularity. His take:
“I will purchase an Apple Watch, as I wear a watch anyway, and want to use Apple Pay, as well as other available apps, including the health monitoring. When more apps become available via the App Store, I will use them, including actual health care apps (when they are approved).
“Yes there may be some other wearables. But none of them look as good as the Apple Watch, or have the Apple ecosystem. These watches will sell, even as the iPhone sold despite the availability of alternatives (think Motorola, Blackberry, Palm Pilot, etc.).”
Thanks for weighing in. The good news is, we won’t have to wait too long to see whether the Apple Watch is successful or not as it goes on sale next month.
Finally, the debate over health care continues to rage at the website. The difference between our system and the systems in use overseas drew particular notice overnight.
Reader Richard B. said: “My friends in Denmark are very pleased with their health care. We could take the best parts of several healthcare systems and come up with a really good one. But just as we don’t copy the best parts of other education systems, we won’t. Why? Republicans believe that good only occurs when someone is profiting from it.”
But Reader Flyboyron countered by saying: “The reasons Republicans say that is because it’s generally true. If no one is profiting, nothing gets refined and adjusted to be efficient. So yes, that’s when good does occur. Name one thing, anywhere, that’s run better by government, or even cheaper, unless ‘someone is profiting from it.”
Keep those comments coming on these issues or others that you’d like to raise at the website.
|Other Developments of the Day|
Cell phone chipmaker Qualcomm (QCOM, Weiss Ratings: B) became the latest major corporation to bestow some wealth upon shareholders. The firm said it would buy back as much as $15 billion worth of its own shares, and boost its quarterly dividend to 48 cents per share from 42 cents per share.
Energy companies are selling billions of dollars worth of new shares and bonds — to investors hungry for bargains and yield — in order to ride out the oil price downturn. The Wall Street Journal tallied $8.4 billion in equity offerings year-to-date, and $4.7 billion in junk bond sales. Those are well ahead of the pace seen in 2014.
Want to read more about the Apple (AAPL, Weiss Ratings: A+) Watch? Here’s a USA Today review from a reporter who got to try the new gadget out after CEO Tim Cook’s presentation. Here’s another one from the New York Times.
Reality TV took a tragic turn in Argentina after two helicopters collided there. Ten people died, including the two pilots and eight French passengers who were working on or participating in a French TV show called “Dropped.” The casualties included famous French athletes and Olympians.
Any of these stories (or others I missed) get your blood boiling? Then don’t hold it in — head over to the website and speak up!
Until next time,