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"Its Not The Economy Stupid, It's The Dollar"

Tyler Durden's picture




 

"It's not the economy... it's the dollar" - That would appear to be the message from the companies of the S&P 500 who have reported in Q3. As FactSet reports, 18 of the 23 companies reporting so far have cited "the strong dollar" as having a negative impact on earnings. Not record domestic inventories (liquidation beginning), the plunge in world trade, not the economic collapse in take your pick of Brazil (depression), China (credit endgame), India (exports/imports crash), and so on...

What is being missed here is that "The Dollar" is the symptom, not the cause of the problems. Capital is flowing for a reason to drive the USD stronger (or printed for a reason)... because the underlying economies are collapsing (yes and interest rate arb hopes).

So if ever there was a reason for The Fed to NOT raise rates, the pressure from Corporate CEOs (through their various lobbying or newsletter-writing alumni) must be immense... which explains the sudden change of mind...

 

*  *  *

It appears, for now, financial engineering (buybacks) has kept the dream alive relative to the soaring USD vs Asian/EM countries (US growth opps); and "hopeful" projections have kept Forward estimates of earnings alive - even as The USD soars against the American companies' most favored growth nations...

 

But at some point it's inevitable - unless there is a seismic shift in Fed Policy (QE4?) - that the USD's strength vs Asian/EM nations will crush earnings... and estimates will be unable to rise with even the biggest hockey-stick forecast.

*  *  *

Remember. crises often start slowly... then erupt suddenly; and equity markets are always (without exception) the last to figure it out.

The credit cycle has well and truly rolled over...

Charts: FactSet and Bloomberg

 

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Fri, 10/16/2015 - 21:57 | 6677847 besnook
besnook's picture

and the strength of the dllar is decided by whom?

Fri, 10/16/2015 - 22:45 | 6678003 BlueViolet
BlueViolet's picture

By the Fed which systematically destroyed American society >> https://goo.gl/IoiSjv

Fri, 10/16/2015 - 23:32 | 6678124 TBT or not TBT
TBT or not TBT's picture

When american businesses complain about a strong dollar, they mean the Fed didn't print enough, in no small part.  Also, they mean to say to stockholders, Hey, Force Majeure bitchez.  We're da bestest, but the dollar, so watcha gonna do.  

Sat, 10/17/2015 - 08:52 | 6678804 847328_3527
847328_3527's picture

I thought it was "climate change" that was Wall Streets trouble?

Sat, 10/17/2015 - 09:12 | 6678825 new game
new game's picture

fucken - eh! BUSHS' FAULT

Sat, 10/17/2015 - 09:16 | 6678834 El Viejo
El Viejo's picture

Its not the economy.  Its the people. 

When Albert Speer realized that Hitler was going to demand that all germans sacrifice themselves for Germany he somewhat came to his senses and when he mentioned this at his trial the judges at Nuremberg let him live.

All idol worshippers put their idol above humanity.

Sat, 10/17/2015 - 10:06 | 6678953 ozziindaus
ozziindaus's picture

There's no printing going on. QE basically gave permission to the banks, who swapped their bonds with the FED, to earn a measly 0.25%. That's it. No printing, no inflation

Fri, 10/16/2015 - 23:14 | 6678089 Ballin D
Ballin D's picture

... we trash the fed for weakening the dollar with QE (and ultimately, inflation).  We cant criticize them for keeping the dollar too strong at the same time.

Sat, 10/17/2015 - 02:23 | 6678393 runningman18
runningman18's picture

Dollar strength is an illusion based on arbitrary foreign exchange comparisons.  What you really have to look at is buying power, and the dollar's buying power is weakening in almost every sector.  People's dollars continue to buy less and less as we continue down this strange path that the banksters set us on...

Sat, 10/17/2015 - 04:55 | 6678515 DIGrif
DIGrif's picture

AMEN

Sat, 10/17/2015 - 10:02 | 6678946 ozziindaus
ozziindaus's picture

What's your timeframe? I can buy more oil, gold, silver, houses..... compared to only a few years ago. In fact the only thing I can't buy more of are the equities. What does that tell ya?

Sat, 10/17/2015 - 02:33 | 6678406 Iam_Silverman
Iam_Silverman's picture

"and the strength of the dllar is decided by whom?"

YenCross.

He's a big playa in FX you know.

Fri, 10/16/2015 - 22:01 | 6677849 DogeCoin
DogeCoin's picture

The Fed should just get the US Airforce to drop tons of FRNs all over the country. Currency bomb all major US cities and start with Detroit and Chicago, problem solved.

Sat, 10/17/2015 - 06:10 | 6678609 bentaxle
bentaxle's picture

Then I, we'd, have to go out and clean all that Doellar shit up man! Tell 'em to helicopter drop nickels instead, but give me some notice so I can put the car in the garage.

Sat, 10/17/2015 - 09:14 | 6678828 new game
new game's picture

charmin drop?

Fri, 10/16/2015 - 22:18 | 6677908 ElectroGravitic
ElectroGravitic's picture

The strong Dollar problem will fix itself.

Keshe Plasma powered Tesla.

http://youtu.be/eqwxKwG93Hg

Fri, 10/16/2015 - 23:03 | 6678055 Apply Force
Apply Force's picture

Keshe...?!?  C'mon man - not even worth a look.

 

Sat, 10/17/2015 - 18:26 | 6680320 jcdenton
jcdenton's picture

And you are about as stupid as they come. Aren't you? Do know what disabled the USS Donald Cook in the Black Sea?

Drum roll please ..

KESHE!

What, you work for Mossad? Moron!

Sat, 10/17/2015 - 23:03 | 6680959 Apply Force
Apply Force's picture

jcdenton - moron, meet mirror

explain Keshe's marvelous invention in one concise paragraph - and then link an example since it's meen over 10 years in "development"

Sat, 10/17/2015 - 05:47 | 6678582 PT
PT's picture

Where's the video that cuts the crap and gets to the point?
... and without the fucking stupid music ...

EDIT:  Or a text file.  Sometimes the internet is painfully slow in these parts.

Fri, 10/16/2015 - 22:21 | 6677918 NoDebt
NoDebt's picture

And for the previous 5 years before that they blamed the weather.  Any port in a storm.  And the wind's still a-blowin'.

Fri, 10/16/2015 - 22:23 | 6677923 Omega_Man
Omega_Man's picture

it will be 10 cents soon, that should fix it... 

Fri, 10/16/2015 - 22:24 | 6677933 mijev
mijev's picture

The strong dollar is killing those companies because they outsource all of their manufacturing, system development and customer service and they import all of their goods?

Oh.. wait.

Fri, 10/16/2015 - 23:49 | 6678172 TheAntiProgressive
TheAntiProgressive's picture

Not that they have destroyed the vast middle class that made up so much "consumption" in our "consumer economy".  Exporting their biggest market to a bunch of cheap chinese that sometimes actually "save".  So our jobs became their jobs and our consumption became their consumption.  Simple.

Sat, 10/17/2015 - 08:55 | 6678806 847328_3527
847328_3527's picture

Thanks to Clinton, Bush and Barry there are now more Billionaires in China then the USA while American poverty rate and jobless rate have soared.

 

Thank you POTUSES. And a special thanks to member of Congress for aiding and abetting them.

Sat, 10/17/2015 - 09:16 | 6678833 new game
new game's picture

follow da dolla...

where it goes, nobody knows

ha, fucken-eh.

Sat, 10/17/2015 - 00:38 | 6678273 tictawk
tictawk's picture

The time line of your charts are clearly different.  The top one is a 4 year span the bottom is a 7 year span.  The pattern bears some resemblence but its all speculation and no real correlation.  Zero interest rates buys a lot of time?

The markets appear to be split with SnP and Nasdaq retracing most of the downdraft and threatening to test the highs.  The Russell and Midcap appear to be lagging.   Bonds are telling a different story like they want to break out upside inline with a shrinking economy.  We live in interesting times.

Sat, 10/17/2015 - 03:35 | 6678450 One World Mafia
One World Mafia's picture

The dollar isn't strong enough to make what they are selling affordable to a country of people whose incomes have not kept pace with the cost of living.

Sat, 10/17/2015 - 03:41 | 6678458 Klemens
Klemens's picture
Breaking News You’re Going to Want To See: You Won’t Believe What Just Happened To Wal-Mart and What That Means For the Economy!

http://beforeitsnews.com/alternative/2015/10/breaking-news-youre-going-t...

Sat, 10/17/2015 - 05:54 | 6678593 Raoul_Luke
Raoul_Luke's picture

Which is why NIRP is just ahead, and then "people's QE" (helicopter money) in a last gasp of the Obama/Yellen wealth redistribution agenda.  Every member of the Fed's board of governors is an Obama appointee.  This will happen - there is no way they let his Administration end in recession.  They need to buy another 18 to 24 months so the recession happens on someone else's watch.  And then the progressives will point to Obama the way they do FDR as the one who "saved capitalism" (by making it a lot more socialistic).  And blame his (likely Republican) successor as the one who screwed it up.

Sat, 10/17/2015 - 06:35 | 6678642 Catullus
Catullus's picture

As if no multi-national corporation hedges FX positions.

Sat, 10/17/2015 - 07:01 | 6678665 Last of the Mid...
Last of the Middle Class's picture

con game 101. Decry the strength of the dollar and open the door for more QE.

Sat, 10/17/2015 - 08:21 | 6678757 lucky and good
lucky and good's picture

Recently a slew of predictions have been made as to both the short-term and long-term direction of market indexes. Indeed the markets have proven to be both fickle and baffling making at times extraordinary price moves that can only be explained in hindsight by the influence of a combination of outside forces such as cross border money flows, the carry trade, computer trading, and much more. 

Wild fluctuations in the markets based solely on the idea the Fed was ready to raise or delay raising interest rates has been way overdone because anyone in their right mind knows unless inflation soars any increase will be very minor. In all honesty the average consumer will see little effect from an interest rate increase of a quarter or a half percent. The article below looks at some of the issues determining current market value.

http://brucewilds.blogspot.com/2015/10/where-is-dow-and-s-heading-next.html

Sat, 10/17/2015 - 09:26 | 6678856 J J Pettigrew
J J Pettigrew's picture

So let me get this straight.

We are supposed to want a cheaper dollar so the corporation can make a bunch more money....as we who hold the dollar and pay more for imported items with those cheap dollars get hurt.....is that what the Fed is promoting?  Hand and hand with Wall st.

Steve Forbes is correct....A strong nation has a strong currency....and in relative terms we are still strong vs the EU...and perhaps China and Russia

Sat, 10/17/2015 - 09:35 | 6678879 1033eruth
1033eruth's picture

I guess we can only use weather as an excuse for so long before we have to graduate to something else.

Sat, 10/17/2015 - 09:37 | 6678887 hoppingrobot
hoppingrobot's picture

Nonsense on India. India is not trade dependent. Even if there is World War 3 and the whole world trade evaporates and countries go back to Autorky, India will be the BEST placed economy in the world.

India is the largest producer of foodgrains in the world and has the largest GOLD reserves in the world (Govt+Private).

It now also has the strongest Navy in Asia. US Navy shits in its pants when they see a Brahmos destroyer in the Indian Ocean.

Sat, 10/17/2015 - 22:50 | 6680925 nosam
nosam's picture

What he said ^^^

Sat, 10/17/2015 - 10:03 | 6678947 NoWayJose
NoWayJose's picture

Take advantage of the 'strong dollar' to buy something cheaper - like gold and silver. Eventually the world will catch on to the fact that the U.S. economy looks stronger (relatively) to the rest of the world - only because we are spending a trillion more each year than we have!

Sat, 10/17/2015 - 10:32 | 6679032 numapepi
numapepi's picture

Strong dollar? The dollar index has been between 94 and 98 for the whole year. Now it is closer to 94 the lower limit than the upper limit and actually broke through the 94 bottom for a moment this week.

Methinks there is more going on than just a strong dollar. Companies blaming the dollar are trying to get us to follow a red herring. Global recession would also account for the lower earnings, but if they reported it, us suckers wouldn't buy up the stocks and take the financial beating instead of the elite.

Sat, 10/17/2015 - 10:41 | 6679055 BarnacleBill
BarnacleBill's picture

We should all put "the collapse of the dollar" into the context of collapsing currencies in general. The USD is the world's major *reserve* currency, so will probably be the last national currency to "collapse". Here's a very brief essay that helps understand the situation. (I'm not an economist, but a financial consultant in the Cayman Islands.)

http://barlowscayman.blogspot.com/2014/02/might-us-dollar-collapse.html

Sat, 10/17/2015 - 10:57 | 6679082 nakki
nakki's picture

Just goes to prove how studip and out of touch most of these CEOs are. The whole world is in a depression because less people have monies in their pockets. Here in the US, the real inflation rate dwarfs the status quos fabricated one when one looks at insurance, rent, student loans, and food.

Incomes have been stagnant over a 15 year period, and instead of growing their businesses with cheap money they lay people of (good paying jobs) and buyback their own stock to enrich fewer and fewer people.

Outsource enough jobs you morons and soon enough you'll have no customers left. Spain, Italy, Portugal and now the Volkswagen Reich are in deep trouble, (hows that youth unemployment rate doing for those southern European countries), and what about Greece how they doing.

The ponzi can only keep going if there's another sucker to feed the system. How is the next generation going to pay for all the boomers. How can the millennials afford to buy health insurance, pay off their student loans and buy new cars, furniture, and the boomers real estate?

This isn't rocket science (notice how I don't use economics, because it aint a science), its common sense. If less and less people have disposable income to buy shit from the major corporations of the world, then they'll make less money. If all the fiat that has been created is entering fewer and fewer pockets then profits will be down. If debt is the only way to keep this and the next cycle going then they'll make less money. When competition has been elimated through monopolies less and less people will have fiat to buy their products.

Its really that simple.

Sat, 10/17/2015 - 11:52 | 6679290 Pumpkin
Pumpkin's picture

Good post.  It is a parasite killing its host.

Sat, 10/17/2015 - 19:47 | 6680520 FIAT CON
FIAT CON's picture

Us $ is the cleanest dirty shirt in the hamper. That's all!

They are all fiat and they're goin down!

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