Even a Weak Dollar Will Be Strong
05/23/2013 8:30 am EST
The dollar doesn't have to do much to keep rising these days. See MoneyShow's Jim Jubak's take on how this will affect investors.
I'm talking to investors and they're saying, "How can the dollar be going up? How can the dollar be going up?"
But I think that's pretty clear. I think the other parts of that, that people are sort of ignoring in their focus on the seeming irrationality of the market...OK. The dollar is going up because you don't have to be the perfect currency. You don't even have to be a very good currency. All you have to do is be a better currency than the other guys.
If you're looking for some safety in this world, where would you put your money? The yen? Well, it's very clear the yen is going to go down, and down, and down, until the Japanese government says no more, wherever that may be.
The euro? Well, the European market GDP is falling there, whereas it's growing in the United States. No one knows exactly what they European Union is going to do, or when, in contrast again to the Fed, where policy is pretty clear. There's no more reason to buy the euro instead of the dollar.
What this means, I think, is that the dollar remains stronger than the euro or yen, the two other major currencies, until something about Federal Reserve policy changes, or things get clearer and better in Europe, and then the Euro becomes a competition again.
What we're looking at here, and the question you really ought to be asking is, what's the effect? What assets are driven higher and lower by a rising dollar?
One of the things that's very, very clear is that if the dollar is going up, it's not good for commodities and commodity stocks. Gold is not going to go up with the dollar rising; oil is not going to go up...all of those things are connected to the dollar.
As long as you think the dollar is going to be moving up in the world against those two major currencies, commodities that are priced in dollars are not a good buy and I'd hold off until I see some sign of the dollar reversing.