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Old 01-27-2015, 02:19 PM   Nav to Top  #1
Vicorka
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Default Why low oil and strong dollar are good?

Lately, quite often I can see in the media that different politicians and investment professionals tell us that low oil are good for the economy and market because it will boost spending. At the same time they tell that strong $ also is good for the economy and market. I could be noob, please explain, why???

As I understand

1. If I make $50K per month, low gas will not boost my spending. It does not matter to me. If I make $2K per month, I live from paycheck to paycheck - my spending will remain the same. I spent $3K per month a year ago and I will spend $2K per month now. The only difference is that the extra money saved from oil I will spend on booze - Good for local companies and not good for oil companies (stock market).

2. Low oil prices means the oil production companies will be cutting their labors. Their profit will be down.

3. Stronger dollar mean the production cost will go up - corporations will have smaller profit. Example: Russian ruble is falling and it makes Russian oil production cheaper. US oil production cost goes up (stronger $) and low oil prices - it is double hit.

4. Stronger dollar means weaker export.

5. Stronger dollar in addition to the last Mr. Obama’s announcement to close loopholes for corporations may push corporations to look for cheaper labor outside of US. IBM is already planning big layoffs. Where do you think the majority of cuts will be?

Maybe I understand something wrong, but I not getting why strong $ and low oil price are good for the economy and stock market. Is that somebody paying media's contributors to make these statements. Why? To push general public to buy stocks while they dump their own shares…

What makes me cautions is an increased volatility. If a year ago bad earnings reports make S&P 500 slide 0.5% top, today, the Nasdaq 100 crashed more than 2%. Investors are nervous and ready to dump on any bad news… We have the heist volatility level since the end of 2011 and it looks like it is going to be even higher. See the S&P 500 4-year chart with ATR (Average True Range) below:


chart courtesy MarketVolume.com
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Old 03-12-2015, 06:53 AM   Nav to Top  #2
Tracy001
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As with oil, not everyone welcomes the stronger dollar. So, this combination seems positive.
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Old 05-29-2015, 04:58 AM   Nav to Top  #3
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I do not think low oil and strong dollar is a good sign . The combination could trigger a stock market melt up.
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Old 05-29-2015, 11:49 AM   Nav to Top  #4
canoodlepiles
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Default Re;Why low oil and strong dollar are good?

Low oil indicates there might be a inflation in the market. And high dollar signifies the strength so these 2 can be considered as index of growth and economic sondition.
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Old 06-04-2015, 02:44 AM   Nav to Top  #5
RockFlower
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The strong dollar makes exports more expensive putting pressure on production sector. This in turn affects the job opportunities in production sector. Similar way, as oil prices drops down more, it will be definitely affecting the employment in this sector. So this strong dollar and low oil prices are leading up for the unemployment in the corresponding sectors.
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Old 01-24-2016, 02:28 PM   Nav to Top  #6
annie_cavely
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I agree that strong dollar is good, but low oil is not my expectation :s
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Old 02-02-2016, 09:56 AM   Nav to Top  #7
fedorpetrov
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So basically nobody answered the initial question :) Why strong dollar + low oil cost is good? I mean, we keep hearing this all the time - so perhaps there is some truth behind it? Or is it just speculative proclamations to boost up public investitions and brighten expectations?
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Old 09-08-2016, 12:36 PM   Nav to Top  #8
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And it's still so...
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Old 01-19-2017, 01:19 PM   Nav to Top  #9
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Originally Posted by fedorpetrov View Post
So basically nobody answered the initial question :) Why strong dollar + low oil cost is good? I mean, we keep hearing this all the time - so perhaps there is some truth behind it? Or is it just speculative proclamations to boost up public investitions and brighten expectations?
Because when the oil is low cost, dollar expenses or cash out rate is less.
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