Pros and Cons of Strong Dollar

Posted: Mar 14, 2015 12:01 AM

We've spent a lot of time whining about the strong dollar's impact on the stock market, but the other side of the equation is the positive impact for American consumers and travelers.

Yes, it does mean a massive trade deficit as imports surge and exports plateau. The U.S. Non-Oil Trade used to be at parity in 1995, and now it is out of control. It is all the cheap stuff from different parts of the world that make middle-class Americans feel wealthy. It evens the score a little, with cash flowing out of this country into other countries, while we get our big screen televisions and new Nike sneakers.

About 15% of U.S. household spending is tied to imports, including 27% of furniture, cars, and almost 35% of clothing.

So, it makes you wonder if it is better for the nation to have a strong dollar, even as large corporations complain about its impact on sales and earnings; and as our trade deficit with the world swells. Here's the rub: the dollar has only spiked like this five times since 1970, and the most recent was in 1985. Each time, the stock market was able to acclimate and rally higher.

The bottom line is currency moves around a lot. More so with all the money printing and the race to the bottom. However, one day, the U.S. dollar will reflect the nation, which means it will fade from current levels. Until then, remember this story.

It wasn't that long ago that we lamented the thrashing of the U.S. dollar, which tumbled on a sketchy U.S. economy and the Fed monetary policy.

The crowning moment of our humiliation came when Brazilian model Gisele announced that she would only take Euros.

Back then, you could get $1.45 for one Euro, and for a few months, we were thinking about beauty and brains.

Now, it looks like Gisele is down 27%. Upon further review, what is the moral of the story: Never bet against America or never take financial advice from a sex symbol?