Dollar down, stocks go up. For American…

Posted on October 14, 2009 by Art Stone

Dollar down, stocks go up. For American economists, this seems illogical – but if you think of the dollar as not the reference currency – all other things being equal – the stock marker should go up when the dollar loses value – the TV folks will of course focus on the meaningless number – the Dow

About Art Stone

I'm the guy who used to run StreamingRadioGuide.com (and FindAnISP.com).
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5 Responses to Dollar down, stocks go up. For American…

  1. msubobcats says:
    October 14, 2009 at 4:32 pm

    I am not an economist…..My big question would be, why is the Dow going up. As bad as the economy seems, I cannot figure out this “contrast”…..

    • Art Stone says:
      October 14, 2009 at 4:40 pm

      The Dow is going up because the value of the dollar is going down. The US stocks are cheaper now for the rest of the world, so they push the price back up

  2. Selmore says:
    October 15, 2009 at 12:53 am

    10000 DOW in the old days is not 7500 based upon the weakened value of the dollar.
    Lets celebrate when it gets to 12500 then we will be even

    • Selmore says:
      October 15, 2009 at 12:54 am

      now 7500

    • Art Stone says:
      October 15, 2009 at 10:57 am

      The Dow is pretty useless as a measure of anything – but people expect the news media to report it. Pay attention to the S&P 500 instead.

      The reason is the Dow index is a numerical average – it doesn’t weight bigger companies more than smaller ones. But the other reason is it was designed originally to track and predict changes to the business cycle. The “industrial” average now includes American Express, McDonald’s and Coca Cola. When it was conceived, the index had companies that made things.

      Also, when a component stock fails and the stock becomes worthless (like AIG), they replace it with a new stock that is going up. When you don’t count your losers, it makes your lndex look healthier than it really is from a long term historical perspective.

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