Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Where Do You Turn When Congress Gets a Deal and the Dollar Says `No Thanks'?

Call it "extend & pretend" or "kick the can." The 11th-hour compromise over U.S. spending merely prolongs the conversation for another several months, replacing one deadline with three:

--Dec. 13 Budget Outline
--Jan. 15 Continuing Spending
--Feb. 7 Debt Limit

Steven Englander, a currency strategist at Citigroup Inc., told clients this morning he believes indecision in Congress puts more pressure on the Federal Reserve to pick up the slack and supply liquidity for longer.

As long as the Fed continues expanding its balance sheet by $85 billion a month, he argues, the dollar has nowhere to go but lower. Looking at a five-year chart, and applying the 9 percent decline he cites from 2004, the lows of 2011 appear the logical target.

We could stop there, and simply conclude: short the dollar. However, we're going to take this one step further by looking at U.S. exporters. A falling dollar makes their goods cheaper to the rest of the world, obviously a benefit to sales. In addition, their operating leverage typically produces greater than one-to-one gains from dollar weakness. In other words, we can short the dollar and make X, or buy the exporters and make, say 2X.

Lest there be any doubt whether the market has figured this out, compare the performance so far this year of the top 16 U.S. exporters to the S&P 500 Index:

Here they are by name:

This group derives 87 percent of its sales outside the U.S., compared to about 62 percent for the S&P 500 as a whole. Also, note the exporters' average earnings growth of 44 percent, compared to 6 percent for the S&P 500 -- now that is operating leverage.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.