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As The Dollar Soars, These Sectors Are Most At Risk
The USDollar Index is soaring (hitting its highest since early April and approaching 2015 highs) as the probability of a December rate hike hits 74%. This is not unequivocally good for a large number of American firms..
Spot the Difference...
So who gets hurt the most?
As Deutsche Bank details,
A stronger dollar, the reset in oil prices to significantly lower levels and slower global growth and investment spending vs. last cycle will challenge many of the S&P’s commodity and industrial capital goods producers for a long time. We’ve been under-weight Energy, Materials and Industrials since last year on these reasons and expect these sectors to underperform in 2015, 2016 and perhaps longer. Unless lower stock prices offer a more attractive entry point.
We remain concerned about the risk to EPS growth at many S&P industries with high foreign profits owing to FX translation from a stronger dollar. This includes most Technology, Industrials, Consumer Staples, and many Health Care and Consumer Discretionary stocks. Until we can observe how the dollar reacts to initial Fed hikes this remains a difficult risk to dismiss or quantify. At current FX rates, FX drags should stop in 2Q16. We see Industrials with most FX risk given its high foreign profits and then disadvantages vs. trade partners.
Charts: Bloomberg
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must be all those winter construction jobs that will save us.
This just help fuck up US export industry all the more. As if things couldn't get any worse, they will with a stronger dollar.
And raising rates? Even higher dollar. lol.
USA - seppuku
+1 for the mental image of America spilling its guts after a well-placed slice.
Strong dollar is really depressing grain prices. Sounds like other countries may be canceling orders for exports, waiting it out for Brazil and Argentina's crops to come in...
haven't you heard about the new fad? "currency adjusted earnings"
Coca-Cola, PG, everyone is using it. just stick some cute new to adjust what is horrible to something that will give you millions on your stock options. criminal, you say? who cares? if the markets are manipulated and nobody cares, why not earnings. it's not like it has never happened before.
congrats, rubin and summers. your economy planning by controlling the media and the economic data releases is a smashing success. for your team, obviously. not for anyone else.
I bought a roll of 20 American silver eagles on Ebay yesterday for $354 with free shipping. Apmex was blowing out inventory. (They sold 1,300 lots of 20 yesterday just on Ebay) Today I notice silver futs are down .25 cents and yet today's Apmex Ebay price for a roll of 20 is $373.
Who needs overseas earnings when you can buyback moar stawk?
I always wondered why walmart and other US companies who buy goods overseas complained about how a stronger dollar was hurting their profits. And then I realized, duh, because they report their profits in Luxembourg where they register companies but don't actually operate.
74% see a rate hike .... ? nonsense .... the Golden Rule of accounting fraud is that it is useless in the face of collapse. Google Bernie Madoff.
How much will they raise rates, 0.15% or 0.25%? Place your bets.
wil anyone ever read this then? ill predict anyhow. 0.1%
yields spike, USD rockets
SPX pending collapse
US gov can't issue more debt, rates are going up and interest payments are going to put an end to yellen bidding all markets
yellen will be looking for a new job - instead of sucking barry's cock for a living
Fence ready jobs when Trump gets elected...
They will not let the USD "soar". This is the "lets get Soros out of his USD long now". Central Bankers let people people like Soros manage their money, and feed them their plans, as they manipulate the markets. There are no fundamentals. They are going to pump the Euro and drop the USD because Europe is collapsing. This is the pre-determined tail of the trade in several assets.
Looks overbought to me but what do I know...
Raising crops, the grain commodities, specifically soybeans, got absolutely hammered yesterday. $.20. It had been holding its own with its normal 2-5 cent fluctuations, but that drop yesterday hurt.
Opening prices means Beans are near $8/by locally...its gonna be a losing year on beans for most farmers here. Corn isn't much better.
one day all your dreams will come true, until then the google ad money will make up for being stuck in a losing precious metals trade , bitches
You need to understand that any stated "Strong Dollar Policy" (strong policy applying to any other debt-based fiat currency) is a complete and total lie.
The strength of a currency is determined by a number of factors that all boil down to Supply and Demand.
This is a real problem for Central Bankers, because fiat currencies are essentially a check they write which draws upon a unit of debt. Because the debt carries an interest charge, the currency is always the smaller of the two, hence IT IS IMPOSSIBLE TO PAY OFF DEBT in any real sense. Any SINGLE debt can be paid of ONLY IF ANOTHER LARGER DEBT IS TAKEN ELSEWHERE.
So when a currency is in increasing demand or 'strong', it means that it is harder to get. When the currency is harder to get, it means it is harder to justify ever-increasing loans. That, in turn, means that the debts backing the currency - which must be continuously rolled over - are in danger of not being able to be rolled over.
And don't think this applies only to the Central-Bank-Issued "Base Currency". No.
Most currency is just an accounting entry created when someone takes a loan from a bank. The kicker is that when the loan is made it creates "virtual" currency...meaning the loan recipient can spend it as though it was actual money - so long as the loaning bank doesn't bust.
But when the loan recipient DEFAULTS on that loan, it wipes out the face value of the loan. The face value of the loan was written against someone else's deposit. (And that is why they want to eliminate cash. Without cash, you have no choice but to invest in a bank.) But the loan ALSO CARRIED AN INTEREST RATE OVER THE PROSPECTIVE FUTURE OF THE LOAN. That interest gets booked and used as the basis for other investments...which are unpayable once it defaults. Essentially that interest is money borrowed against a future which may never happen. When the interest defaults in a commercial loan it wipes out a corresponding amount of "base-currency"...or the bank bankrupts, whichever happens first.
This is what Central Banks central purpose means wherein they protect the solvency of Fractional Reserve banks who are fundamentally unstable by the very nature of their business. They exist only to transfer the fundamental indivisible risks of that banking practice from banks to general holders of the currency.
You can't have a "Strong Dollar" and inflation at the same time, for the one is kryptonite to the other.
You can't have a debt-based fiat currency without continuous, systematic monetary inflation. The structure of such a system is exactly that of a Ponzi scheme, where ever more must be due from the future in the form of accumulated interest which may or may not exist in the future, and which must grow faster than the currency based upon it ad infinitem. Lacking inflation, it simply collapses.
You can't have a "Strong Dollar" (or a "Strong" any other debt-based fiat currency) for any period of time without it collapsing.
The "Strong Dollar" today is not a prelude to an interest rate hike, but an expansion of the monetary base.
Didn't those ISIS helium-filled condom-bombs soar for a while also?
The comment by gcjohns1971 (above, at 11:01) is one of the best I've read for a while. "The "Strong Dollar" today is not a prelude to an interest rate hike, but an expansion of the monetary base" sums up the situation nicely.
I'm not an American, and don't live in the US. My home is the Cayman Islands, in the Caribbean, where the currency is (in effect) the USD. Naturally I have a strong interest in the subject. I keep a personal all-purpose blog, on which I sometimes post opinions on financial matters. Way back in March 2012 I posted one on the general topic of currencies, which may be of interest to some ZH readers; it's still as relevant as ever.
http://barlowscayman.blogspot.com/2012/03/gold-and-other-currencies.html