Strong Dollar, Weak Dollar: Which is Best?

The dollar, which is hitting new lows against the Euro and other currencies today, is sparking considerable debate. Gold and oil are hitting new highs, partly on the dollar's weakness.

The weak dollar has been a big help to U.S. exports and definitely helped corporate earnings of U.S. multinationals. That is the standard line, and it's true.

But David Malpass at Bear Stearns, in a note to investors this afternoon, highlights some of the downside of a weak dollar:

--Core inflation will be elevated, resulting in higher real rates.
--Investors typically seek countries with appreciating currencies.
--Wealth abroad is rising faster than U.S. wealth, with implications for geopolitics and national security.

For the moment, the rise in commodities is clearly helping the stock market. Today, precious metal and some energy stocks are hitting new highs on the commodity strength. Energy stocks are critical to the market, since they are one of the sectors (along with tech and materials) that are showing any relative strength at all.

Questions? Comments?