Chart Spotlight

A couple of weeks ago the Fed Governors were heard saying that the only way that a rate cut would happen is that if a financial crisis unfolded. Well we are all aware of the discount rate cut a week ago Thursday that stopped the bleeding in stocks. Now many think that a cut in the Fed Funds rate by the September 19^th meeting is a foregone conclusion. The flip side of this “bail out” of our mortgage/financial issues is a depreciating US Dollar. Below is long term chart of the US Dollar Index and as you can see it is back to levels that have been support for almost two decades. Breaking the 80 level, which appears to be long term support, could have multi-faceted ramifications. A falling dollar does help domestic companies with a strong presence overseas. The "but" is that foreigners could possibly look less supportively at our securities, especially US Treasuries. Therein lies the rub, many feel that the low interest rate debt/housing bubble has been financed by foreigners, especially the Asian investors. Reducing their appetite for our securities market could have a negative impact on our stocks, bonds and even real estate. Since 2002 many of their dollar denominated securities have dropped 30+% from currency fluctuations. That requires a sharp rise in the core value of the asset class itself to offset that drop. A break below 80 could be the straw that breaks the camels back?

Final Thought

“Perfect financial planning is when the first check you bounce is to the mortician”