MAD Paradigm Shift Between Dollar and Stocks?
One of the hallmark signature of a weak 3rd world emerging market is the relationship between its currency and stock market index.
In a weak economy you will see the currency devalue while the stock market rises in that currency. But when that same stock market
is measured against another currency such a the US dollar it is actually falling.
Here is an example. Compare USDTRY
to the XU100 (BIST 100 Index)
www.tradingview.com/chart/ztx1WdkA/
What you will find is that the Turkish lira is falling while the BIST 100 index is rising in TRY
But when you look at that same index in TUR ETF (which is in dollars)
You see that the BIST100 index is actually falling in dollar terms.
What we observe in the US dollar today is very much the same thing. Currency falling, Stocks rising. I call this MAD (Monetary Asset Devaluation)
MAD can also be observed in many other stalling economies other than Turkey, such as Pakistan, Russia etc.. Most famously today Venezuela.
While there are always different stages and varying degrees of MAD, some mild, some short lived, other chronic and severe this does not change
the diagnosis of MAD. While I keep the more in depth analysis for subscribers I hope you do your own research to better understand MAD effect
in stock and currency prices and the economic problems associated with it.
In a weak economy you will see the currency devalue while the stock market rises in that currency. But when that same stock market
is measured against another currency such a the US dollar it is actually falling.
Here is an example. Compare USDTRY
to the XU100 (BIST 100 Index)
www.tradingview.com/chart/ztx1WdkA/
What you will find is that the Turkish lira is falling while the BIST 100 index is rising in TRY
But when you look at that same index in TUR ETF (which is in dollars)
You see that the BIST100 index is actually falling in dollar terms.
What we observe in the US dollar today is very much the same thing. Currency falling, Stocks rising. I call this MAD (Monetary Asset Devaluation)
MAD can also be observed in many other stalling economies other than Turkey, such as Pakistan, Russia etc.. Most famously today Venezuela.
While there are always different stages and varying degrees of MAD, some mild, some short lived, other chronic and severe this does not change
the diagnosis of MAD. While I keep the more in depth analysis for subscribers I hope you do your own research to better understand MAD effect
in stock and currency prices and the economic problems associated with it.
Comment:
Correction on link of the BIST100
Comment:
This chart is still in play stronger $ = sideways to lower markets. "Fear"
Real Macro Economic Investing
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