Chart 1. USD Monthly. In a strong downtrend, no sign of a turnaround, will break 1992 lows very likely soon.
Charts2. TNX, Teaparty and others posted this one already, with different perspectives. My take, its tied very closely to the USD chart and as soon as USD implodes there will be a huge run on the bonds.
Now, as for the stocks, its anyones guess. There will be multiple forces affecting them both ways.
Positive for stocks... The falling dollar will depreciate the commodities prices, and stock prices as an asset class. And will make US exports more competitive so it somewhat helps.
Negative for stocks.... Rising interest rates threaten to significantly supress the economic activity, which in turn will be very exhagerated by huge amounts of already outstanding debt. General liquidity contraction is also very likely. Second negative, in a general run on the dollar assets P/E's may significantly contract, even if the underlying commodities will be skyrocketing in price. Remeber thqt its XLB and oils are market leaders, not anything else.
So from the stock market perspective, no one really knows what will happen. Though da_cheif apparently thinks that errosion of buying power by the US dollar is great news. But for the US consumer drowning in debt, its not. Its a way out for them, and this is what is probably happening. But its a way out of debt through excruciating poverty which is likely to follow.
Edited by ogm, 15 July 2007 - 02:16 PM.
