CHART OF THE DAY: OBAMA WILL RISE AND FALL WITH THE DOLLAR
26 November 2009 by TPC
10 Comments
As John Tamny so eloquently described the other day, the electorate is only as happy as the value of the dollars in their pockets. Many Presidents have fallen by the wayside as they attempt to devalue their way to prosperity. It never works. Thus far, Obama is learning this lesson the hard way as the dollar crumbles and his approval rating follows. Shorting his approval rating was the no brainer trade of the year. If only I could have found a buyer….
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I’m afraid you’ve got it wrong. Most Americans are not even conscious of the dollar’s fall. Moreover, most goods and services consumed in the US are produced in the US. So changes in exchange rates have little visible impact on the consumer’s purchasing power.
By the way, smart traders know that most correlations are just noise. You have not learned that lesson.
- An American in Paris.
TPC Reply:
November 26th, 2009 at 11:00 AM
The idea that Americans are not impacted by the dollar because they do not do business with foreigners in their currency is one of the greatest myths in the investment world. I hate to be blunt, but such a comment shows a great deal of ignorance regarding your understanding of the forex markets.
As for your correlations comment – please show one shred of evidence backing up such a comment….That is quite a bold accusation and one I am confident you will never be able to prove. I’ve done an enormous amount of work on the topic: http://pragcap.com/the-uncorrelated-return-myth
Roderick Beck Reply:
November 26th, 2009 at 12:39 PM
Come on, be serious.
No one believes that Obama’s approval ratings are down because the dollar has lost ground against the Yen or Euro. Since you cite approval ratings, show me a poll where Americans list a weak dollar as a key concern. It doesn’t exist.
The preoccupation of America right now is a high unemployment rate – economic insecurity or fragility.
The recent surge in American exports is largely due to a weak US dollar. The same reason the Chinese keep their currency pegged to the dollar.
The spurious correlation (I am a statistician and a time series expert) to which I am referring is precisely your claim that the correlation between the dollar’s fall and Obama’s popularity implies or suggests correlation.
You need to steer clear of politics if you want to maintian crebility.
Afterall, your side lost the election and will probably lose the 2012 as well …
TPC Reply:
November 26th, 2009 at 1:05 PM
Aren’t we just filled with assumptions? You don’t know my political affiliations and assuming that I am a hard lined Rep or Dem would be entirely wrong. Like my investment approach, I am entirely flexible and favor the candidate who is most appropriate for the times. I have voted for both sides. I am not politically biased like so much of the country is. Again, your assumptions are incorrect.
As for the dollar. A currency is generally a good long-term reflection of the health of a country’s economy. Investors will seek haven in strong currencies based on the assumption that that currency and country is a good and safe investment. Reference the money pouring into Asian economies now and out of western economies. Again, you falsely assume that currencies are independent assets rather than a broad reflection of economic strength. That is unbelievably wrong.
The falling dollar represents a lack of faith in the U.S. government to repay its debts and the poor future investment potential of the U.S. economy. It is the ultimate barometer of ones economy. Weak employment is is simply a by-product of this overall economic weakness which is so perfectly presented by the falling dollar.
Again, I think you have much to learn about the role of currencies in the global economy. It’s clear that you don’t exactly understand the correlations.
Pat Reply:
November 26th, 2009 at 2:33 PM
I don’t know when the American in Paris was last back to the US, but gas prices for one are high. It’s just that people have accepted them. Food isn’t cheap either, and while many things are made in the US, try picking something up and see where it’s made. chances are it’s not the US. I tend to want to verify stats, and I don’t see hardly anything that is made in the US.
Maybe the American in Paris is suggesting like another Parisienne that we eat cake.
Our French friend could learn a thing or two from reading TPC more often.
“Moreover, most goods and services consumed in the US are produced in the US.”
“Since you cite approval ratings, show me a poll where Americans list a weak dollar as a key concern. It doesn’t exist. ”
Statements such as the above proves quite convincingly that most Americans are either not thinking, or living in 1940s, or just believe everything the MSM feeds them. Sites like this opens one’s minds, even if we disgaree upfront, make it a point to google a little. The internet might be America’s only hope now that big corporates and wallstreet control the MSM.
Btw, nothing here yet on Dubai? It won’t be the weak dollar which would trigger the next wave, it would be something from where our MSM doesn’t talk about right?
I believe the strength of the currency reflects the strength of its country. The popularity of the president relate to the strength of the dollar. Reagan and Clinton was popular and had strong dollar during their presidency. The Bushes years had weak dollar and they are unpopular.
I don’t understand why the stock market weakens when the dollar strengthens. Doesn’t the stock market also reflect the economy?
I ain’t affected by no weak dollar. When I rides my hoss into town I only buy bullets. And my ranch ain’t got no Chinese mortgage. I’ll only vote for Palin and Huckabee no matter what happens. But I’m a TEXAN which ain’t exactly the same as a merican.
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