markets -- financials, correction, dollar, etc.

two signs we are nearing the end of the correction --

1. financials no longer going to new lows (banks report bad charges yet don't hit new lows)
2. tech stocks -- the darlings of the recent market are beginning to experience a correction.

When investors/traders throw out their favorites it means they no longer feel safe owning any stocks. Its a sign the decline is done but its critical to realize that the market can't bottom as long as the favored stocks are holding up.

The dollar -- its dropped quite a bit recently and the first thing I want to make clear is that whenever the dollar declines, we who live and work in the US are poorer. Some pundits try to argue that the dollar falling is good for something but it is absolutely impossible for any country to become wealthier through a declining currency. by definition your currency declines in value, any assets valued in that currency decline in value too.

That said, exporters will gain share of the shrinking wealth pie because their products appear to be cheaper to foreign buyers after a drop in the dollar.

while some blame the falling dollar on interest rate differentials, I think its more to do with investors betting investment returns will not be as good in the US as they are in other parts of the world. beliefs like that occur and are reinforced as the dollar drops. but at some point -- probably soon given that some super model has decided not to be paid in dollars -- our assets become too cheap to ignore.

why would foreigners think our asset returns won't be very good? Perhaps every day they read about Congress and some of the presidential hopefuls talking about raising taxes on incomes and capital gains, etc. the Fed appears to rather have some increase in inflation then have a slowdown in economic growth. capital goes where it feels welcome -- capital rarely feels welcome where it's value is hurt by taxes and inflation.