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Does the US Want a Devalued Dollar?

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The quote du jour comes from someone who thinks so.

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Risky assets remained in favor during the past week, generally helped along by fairly robust economic data and better-than-expected corporate earnings reports. A number of bourses, crude oil, inflation-linked bonds, and high-yielding corporate bonds and currencies recorded fresh highs for the year, whereas gold hit an all-time high of $1,070.20 per ounce.

Assets such as government bonds and the US dollar saw fading demand as safe havens now that the global economy is on the mend. Similarly, credit-default spreads tightened markedly and the CBOE Volatility Index (VIX) declined to its lowest level since early September 2008.

The Dow Jones Industrial Index passed a psychological milestone this week as the Index broke above the 10,000 level for the first time in a year, although it then declined again to fall shy of the roundophobia number by four basis points by the closing bell. The Dow first broke above 10,000 more than ten years ago in 1999 and has since done so on 26 occasions. Yes, a ten-year buy-and-hold index investor has had no capital gain over the period!



Meanwhile, according to the Financial Times, a survey of 44 leading economists by the National Association of Business Economics (NABE) showed the jobs that were lost during the Great Recession aren't expected to return before 2012, while anemic wage growth of only 1% this year and 2.2% next year is forecast -- the slowest two-year period on record. "But the way that investors are almost relying on unemployment to stay high [and central banks not to start exiting from the exceptionally low interest rates any time soon] demonstrates that the recovery, in markets and the economy, remains on shaky foundations," warned Financial Time's investment editor, John Authers.

The past week's performance of the major asset classes is summarized by the chart below -- a set of numbers that indicates an increase in risk appetite.



A summary of the movements of major global stock markets for the past week as well as various other measurement periods is given in the table below.

The MSCI World Index (+1.4%) and MSCI Emerging Markets Index (+2.1%) both made headway last week to take the year-to-date gains to +25.6% and an impressive +70.4% respectively. Interestingly, Chile is now only 1.5% down from its July 2007 highs and could be one of the first markets to wipe out all the financial-crisis losses.

Notwithstanding a down-day on Friday, US indices closed higher for the week. The year-to-date gains remain firmly in positive territory and are as follows: Dow Jones Industrial Index +13.9%, S&P 500 Index +20.4%, NASDAQ Composite Index +36.8%, and Russell 2000 Index +23.4%.



Top performers among stock markets this week were Sudan (+22.6%), Kazakhstan (+8.9%), Cyprus (+7.6%), Egypt (+6.0%), and Hungary (+5.5%). At the bottom end of the performance rankings countries included Nigeria ( 4.2%), Thailand (-4.0%), Qatar (-3.2%), Bahrain (-2.8%), and Ireland ( 2.4%).

Of the 99 stock markets I keep on my radar screen, 76% recorded gains, 21% showed losses, and 2% remained unchanged. (Click here to access a complete list of global stock market movements, as supplied by Emerginvest.)
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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