Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The US Dollar Falls whilst Stock Markets Rise - A Major Market Disconnet

Stock-Markets / US Stock Markets Apr 25, 2007 - 11:58 AM GMT

By: Money_and_Markets


Sean Brodrick writes . Right now, there's a major disconnect in the markets — the U.S. dollar is going down while U.S. stocks are going up .

Look at my weekly chart of the dollar. If this were a stock, we'd be talking about a potential bankruptcy!

Why is the dollar in the dumps? My coworker Mike Larson posted a good explanation to his blog, Interest Rate Roundup :

"The U.S. Fed is afraid to raise rates, despite the fact inflation is well above its stated comfort zone, because the housing market is in the toilet. Meanwhile, both economic growth and inflation is surging overseas. So, foreign central banks are hiking interest rates … As a result, capital is migrating to foreign countries and away from the U.S. dollar."

That's pretty darn negative! And it begs the question: How can stocks be hitting new highs when the basic unit of trust in the American economy, the dollar, is careening into the gutter?

Well, if history is our guide, this shouldn't be happening! In a recent issue of his Black Swan Currency Currents , my good friend and crackerjack currency trader Jack Crooks charted the dollar vs. the S&P 500 index …

As you can see, the dollar and U.S. stocks used to trade in tandem. But no longer!

Here's what Jack has to say about the situation,

"It's interesting to see such a dichotomy, or decoupling, among major asset classes in the same country — both of which are supposed to express some degree of confidence in said country.

"For one, [this decoupling] is telling us relative to the value of the dollar, based on the US dollar index, stocks have NEVER been more expensive ."

That's another pretty bearish view! Personally, I'm more sanguine when it comes to America because I think the world's largest economy has more resiliency than a lot of people realize.

But here's the point: If you're invested solely in U.S. stocks and dollar-denominated investments, this is a crucial juncture, and it's not easy to say which direction things will head next.

That's why I'm glad to be following the natural resources markets. Why?

Even If the U.S. Falters, Asia Can Pick Up the Economic Slack

I could argue that this is already happening. The TREMENDOUS demand we're seeing out of Asia for commodities of all types — energy, precious metals, uranium and more — combined with an ocean of global liquidity, is probably enough to keep commodity prices and select commodity stocks humming along no matter what happens in the U.S.

Remember, commodity demand from Asia is enormous and growing. China is the world's #1 user of copper … steel … and zinc. And it's becoming a bigger and bigger buyer of gold, silver and uranium. India is right up there, too.

What's more, mining and materials stocks are in a merger-and-acquisition frenzy. Last week I told you about Paladin's potential takeover of Summit Resources. Well that's just the tip of the iceberg!

For example, Algoma Steel Inc. became the latest Canadian company to agree to be bought as Essar Global, India's third-biggest steelmaker, pitched woo. And Ipsco Inc., North America's second-biggest maker of steel pipe, is also in takeover talks.

These companies — who have a very good handle on their businesses — aren't paying top dollar for the competition because they think prices are about to go down!

Maybe they read the IMF's World Economic Outlook, which came out in April 2007. It said the world economy should grow at a robust 4.9% in both 2007 and 2008. And it indicated that this rate should hold even if oil goes up to $75 per barrel!

One last thing to consider: Natural resources like gold and silver are priced in dollars — so as the dollar goes down, they usually go up!

In other words, those with a more global perspective … as well as those who diversify their portfolio into precious metals … could not only survive a bear market in the U.S. …. they could thrive.

And let me tell you …

There Are Plenty of Other Reasons To Be Bullish on Commodities

A strong global economy, and particularly intense demand from Asia, is playing a role in rising natural resource prices. But there are other forces at work, too.

Let's look at a few …

In crude oil, Mexico's big oil field is tapping out! From January 2006 through February 2007, Mexico's supergiant oil field, Cantarell, lost a staggering one-fifth of its production. And in March, Cantarell's production fell by ANOTHER 5%.

In fact, the Wall Street Journal reports that Cantarell is fading so fast that Mexico may become an oil importer within eight years. Mexico is our second-biggest supplier of imported petroleum, below Canada and above Saudi Arabia — accounting for more than 11% of our imports. We could feel the squeeze from Cantarell as soon as this summer. More and more analysts are calling for $4-a-gallon gasoline this summer.

For gold , production is falling around the world. It's falling in South Africa, the U.S., Australia, Peru, Russia and Canada! And that's despite more spending by miners and rising gold prices.

Plus, investment demand is exploding! Exchange-traded funds have made it easier than ever for U.S. investors to buy gold, and two gold ETFs just made their debut in India.

These are two of the forces I named in my Dow Jones MarketWatch article,
"7 Reasons Why Gold Should Surge," and there are more than that!

The proof is in gold's chart. You can see that it pushed above the high it set in February, came back to test it and is now taking off again. I think we're on the way to $750-an-ounce gold.

Then there's uranium, where supply just can't keep up with demand. In fact, some analysts say mine production won't catch up to demand until 2017 — if then! We're looking at a 10-year bull market in uranium, minimum.

Heck, maybe that's why the New York Mercantile Exchange (NYMEX) recently signed an agreement to introduce uranium futures on its electronic platforms next month.

I could go on and on about all the very bullish stuff. I haven't even touched copper yet … or told you how U.S. steelmakers are laughing off talk of a recession.

Bottom line: For natural resource investors, the current market disconnect is something to be aware of, but not something to worry about.

If the U.S. economy keeps trucking along, and the U.S. dollar recovers, Americans have more money to buy things and commodities go up. And if America falters and Asia stays in the lead, commodities will still go up. Talk about a win-win situation!

Yours for trading profits,

By Sean Brodrick

P.S. If you want to profit from China's megatrends, you might want to check out my new Red-Hot China report. It will tell you about five forces shaping China and the global economy, as well as three stocks and three funds to play those trends. It's an $89.95 value, but for a limited time, you can buy it for $49.95. To find out more,

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in