Why Is DOW Holding Up So Well Compared To Foreign Indexes?

[smsnead2]

I don't have any allocation recommendations but I am not pulling my money out of domestic stocks because that would guarantee that I lose money on them. I do not need the money today and can afford to try to wait for them to go back up again. If you get out now, when do you make the decision to go back in- after they have already made a lot of gains off the low? That puts you at risk of buying back in nearer a peak and missing a lot of the run up. I cannot time the market- nobody can. You may change where you put new money- but for myself I am not taking old money out. Foreign investment includes currency risk- if the dollar goes up against the currency then the value of foreign investments goes down. You could avoid that by investing in US trading companies with foreign exposure but the economic situation seems to be hitting much of the rest of the world as well. Just my own perspective- not intended as investment advice. Take any investment advice with a grain of salt.

Thanks Zippyjuan. I would view a reallocation from domestic to foreign funds as being sort of a "sell low, buy lower" strategy. If you listen to Schiff, the currency risk is the primary reason to get out of the domestic markets. The US dollar has been rising; but how long will that last? It just seems that with the foreign markets reaching lower levels and the current strength of the US dollar, that the likely pendulum swing is for the foreign markets to rebound faster against an inevitable decline in the strength of the US dollar. I just don't know when or if to switch strategies.

Who knows. Maybe the foreign markets will struggle just as much, if not more, than the domestic markets for the forseeable future.

 

[Malakai]

Rate cuts haven't triggered the rallys they usually do lately. Neither did the bailout.

TBH in the medium and long run I think they are losing their control over the markets. They can make small jumps one way or the other in the very short term, but even that is getting weaker.

A bunch of companies with dimininishing earnings, a bunch of unpaid debt, and big layoffs are not going to hold thier market value forever.

 

[Fight-n-Mad]

The Fed Funds rate really doesn't mean much now anyway. It's just a target that they try to maintain by buying and selling bonds on the open market. And they haven't been able to keep the effective rate anywhere near the target since early September. It was actually 0.95% on Friday, even though the target is 1.5% right now. http://www.newyorkfed.org/charts/ff/

The rate cuts are only psychological at this point, and it's gotten to where they only make things worse whenever they try to use their psychological tricks to influence the market. It think it just sends a signal that things are really bad if they have to keep cutting rates.

The Discount Rate might have more of a direct effect on things, but ultimately, it doesn't matter how much money banks borrow from the Fed if they're just sitting on it anyway.