Thursday, October 2, 2008

Living with a strong Dollar

"Many momentous historical developments occur without the participants fully realizing what is happening." - George Soros

As the Rupee weakens, there is a broad consensus that the dollar is likely to become stronger. www.blackswantrading.com suggests that year 2009 is likely to see a strong dollar. They say, the reason is:
Our broader underlying theme of dollar bullishness hasn’t changed—our scenario is simple: Deleveraging means money moves to the center (US capital markets). And there is unseen dollar support by big players out there, as it is in no one’s interest for the world’s money i.e. the world reserve currency, to be trashed when confidence in the system is paramount to achieving stability and staving off global depression.
If this does happen, then their prediction is:
--> The Euro continues to weaken
--> Crude prices will remain on the lower side
--> Commodities will remain under pressure
--> The up trend for Gold is over and done with
--> Stocks - No guess on where this could go

As the U.S. economy weakens, here are some thoughts:
We’re not in for easy times like we’ve become so accustomed to – that’s for sure. But
it’s not the end of the world either. The lending system is going through a cleansing
period. After a bubble of easy credit that’s now burst, it’s about time we get some
cleansing.

What does this mean for our market ?
Well, economic policy is beyond the technical analysis capabilities of this blog. So, I will look at the charts and say:
A bear market does not end with drama. It ends with a whimper. Slowly, such that investors are not even aware that price have started rising. A strong dollar with a weak American Economy may not be good news for India. This coincides with the fact that more time is needed for this bear market to end.

4 comments:

tushar said...

So sir are IT companies @ benifit.
I mean will IT companies outperform the index in 2009 due to strong dollar.
If so,
Which are ur IT picks?

Deepak said...

with crude prices down, one thing is for sure that it is bigggg positive for the OMC. There is no problem of toplne growth with recession in USA or rest of world. On the other hand cost is coming down thus helping the bottomline growth. It is also not widely owned. Therefore the biggest defensive stocks in todays scenario is OMC and will give far better returns in the bear markets as also in the case of bear market rallies.

Manoj Tiwari said...

Good Evening Sir,

gold & crude going downside,generally it has been observed that when it goes down indian mkt goes up,but now a days no co-relation exist,whats your view ?

kindly show us Light.

Manoj Tewari
099 73 12 56 78

s.k said...

Dear sir-recall my comment of FM/BHAVE led rally?going by pure technicals,if the bear markets are to terminate six to eight months from now then satyam @225,kotakbank@350,Dlf@175,Nifty@3175 is a possibility. Do you agree?