No. of Recommendations: 14
US dollar index is down -10.3% year to date.
So, for example, Berkshire's stock price is up +7.3% year-to-date measured in shrinking US dollars, but down -3.8% measured in the average other currency.
Snip from the FT today:
"Investors are fleeing long-term US bond funds at the swiftest rate since the height of the Covid-19 pandemic five years ago, according to Financial Times calculations based on EPFR data.
Why it’s happening: America’s soaring debt load is causing jitters among the institutional investors that use these funds..."
A lot of folks living in the US don't realize how big a deal this sort of change is. It's like a fish doesn't notice the water they're swimming in. But every price you see quoted in US dollars should be taken with a grain of salt, because the yardstick has been shrinking lately. Generally speaking, a big fall is a pay cut as it generally shows up as inflation later on. For investors in assets priced in US dollars, it's an immediate fall in the value (purchasing power) of the portfolio.
The US dollar is still fairly high compared to the levels this century--it was never this high 2004-2014. The optimist could see that as "it's no big deal, normal fluctuation", and the pessimist could see it as "there could be a long way yet to fall".
I personally anticipate a bounce, followed by a longer term sliding trend. The reasoning for expecting the longer term slide is that the US dollar's level is set in large part by a balance between the US current account deficit (largely driven by the federal budget deficit) and the constant influx of portfolio investment into stocks and bonds from elsewhere in the world. If the latter slows to some extent (as I think it will) and the deficits don't change (I don't think they will), the dollar will fall. Maybe.
Jim
