The Sky (Dollar) Is Falling! And What to Do About It

I read (and here's a shameless plug for) The Motley Fool, some of the best investing advice on the Web. Okay, the good advice is free, the better advice is going to cost you a bit. So here's a great article on the Dollar and its seeming free-fall.

The Dollar is dropping and there seems to be no bottom. Oil prices are rising and there seems to be no ceiling. China seems to own us and there are trillions of bad loans out there just waiting to bite another big bank in the butt and send stocks tumbling yet again....

First to the Dollar. Call up your favorite chart of the S&P 500 for the last few days. You'll see a very volatile market, up one day and down the next. What is happening is traders selling one day (the market falls), seeing bargains in other positions and buying the next day (the market rises). The intrinsic value of the companies being bought and sold didn't change, the market value did. The same thing is happening with the Dollar, the period is just longer. Due to high oil prices and the subprime market, people are seeing other currencies as the better buy. Now a few months from now when Caterpillar, Boeing and some other prime US companies are bargain priced for someone in Euroland, they'll start buying them and the Dollar will begin to rise in value. Oh, and investors will see shares of Citibank and others at a bargain price and begin to buy them as well. Neither the Dollar nor the banking industry are dead. They're just a bit punchy. And, if you're investing for the long-term, it's time to look at buying dollar investments. They're cheap now and will continue to get cheaper for a while.

Oil, well, there's good news and bad news there. The good news is that we might finally get a renewable energy bill worth its salt and Congress may finally move to reduce oil consumption. The bad news, if you just bought that manhood-enhancing SUV that gets about its length to the gallon, it's gonna hurt for a while. Likewise, your heating bills, if you heat with oil, will be painful. The good news is that the high prices will not only spur oil exploration but research into renewables and energy efficiency. This just may create some good jobs here.

We've seen this before. The first time I was in Germany the dollar fell to 1.3DM per dollar. It was rough living on the German economy but doable. There will be pain but if the pain causes us to save more, spend less abroad and cut our oil consumption, it might be a good thing in the long term.

Chicken littles, flame on.