V. 20:9 (83-85): Working Money: Driving Miss Dollar by David Penn

V. 20:9 (83-85): Working Money: Driving Miss Dollar by David Penn
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Working Money: Driving Miss Dollar by David Penn

What does the decline in the dollar say about stocks?

Consider the two “dollars” in Figure 1. The first “dollar” represents a retail chain that sells a variety of products at a price of $1.00 or less. This chain — which runs stores named Dollar Express, Dollar Bills, Only One Dollar, and Only $One — is ranked particularly high in Investor’s Business Daily’s stock tables, garnering particularly good marks for industry group relative strength and sales, profit margins, and return on equity. According to IBD, people are accumulating the stock as opposed to distributing it. And to top it off, this chain notched a 52-week high as recently as May 14.

The second “dollar” represents the currency of the world’s only superpower. This currency had a great track record of strength throughout the 1990s — in fact, there was none better — but lately the greenback, as this currency is affectionately known, has been showing signs of wear. Even though this currency is still “the world’s currency,” its native nation has begun to stumble under the burden of corporate debt, underwhelming profits, and the prospect of deficit spending by its government. There are those accumulating this currency as well, but they seem to be doing so more in an effort to “save” the currency than to profit from it. An IBD headline from May 23, for example, reads: “Japan Buys Up Dollars To Halt Slide, Protect Own Fragile Recovery.”

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