No. of Recommendations: 2
Jeff,

I am having problems with the Dollar Index. Louis Yamada uses a trade weighted index that would be helpful, but even that could be inaccurate because a lot of dollars flow through China then onto Australia, Canada and other commodity exporting countries.

I am just guessing, but the data I have is sparse and unreliable, it seems that the dollar is nearing its true value. Remember, dollars are tools, just tools to be used in trade. Impact of the dollar on trade and industry is not a function of where it is a given moment, rather it average value over a time period.

http://stockcharts.com/h-sc/ui?s=$USD&p=W&b=5&g=...

While this index, the $usd index, probably does not represent an accurate portrait of the value of the dollar and its use in international trade, it is the one I can see easily and it is at least a shadow of the truth. I made the dollar invisible and put in the 1 year, 4 year and 10 year moving averages, (50 week, 200 week and 500 week) You can see the averages are well above the dollar. These averages though are what return profits, determine numbers that go into spreadsheets that determine business decisions.

As these numbers fall, you can expect the businesses to start making investments based on them. The decisions do not have to generate exports to have a major impact on the balance of trade. The high price of oil is creating major wealth in the shale oil fields. The cost of extraction is high and a lot of the money has to stay local because of the effort required to extract the oil, this oil does not get exported, but it does displace imported oil. The same with timber, a lot of Canadian wood products were coming into the country, (despite the huge costs associated with their godless single payer health insurance complete with high taxes, death panels and rationed service) that timber is less likely to compete with the Canadian dollar as high as it it is. Finally, much of the South American food and other agricultural products are finding home grown competition.

These things tend to make me very bullish on the heartland. While the people from the coasts tend to laugh at the people in the middle of the country, they can typically drive through the middle without having gun stuck in their window and their fingers bitten off for their jewelry. This is not the case in many places on the planet.

Currently in Nacogdoches, there is 1 Fannie May repo available. In South Dakota, 116, mainly in the commercial and banking centers. A quick look at Zillow confirms that housing prices are still falling, but what the statistics are not showing is that the value of the houses sold are falling. I.E. the repo in Nacogdoches is 1700 square feet. I am unwilling to pay even 50 dollars a square foot for it, yet am very happy to build a new house for 92 dollars a square foot.

I caution everyone to be very careful about nationwide statistics, the changes are not finished, and there will be opportunities, but they will not be the ones we had starting in the 1980's.

Cheers
Qazulight
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