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Uncertainties driving the markets

Originally published on RGJ ‘s website, http://www.rgj.com/story/money/business/2015/03/20/uncertainties-driving-markets/25113763/

The financial markets have been focused on three uncertainties: the strong and rising value of the dollar vis a vis other currencies, weakening U.S. economic indicators, and the timing and magnitude of Fed policy actions. All this with a background of the ongoing Greek tragedy and continued political strife and terrorism worries. Volatility has resulted.

The Strong Dollar

The rising value of the dollar impacts the reported profits of multinational corporations as they translate their foreign exchange into U.S. dollars, because the foreign earnings translate into fewer dollars. Normally, a gradually strengthening currency can be managed if the growth rate in the company’ s business exceeds the growth in the value of the currency. However, when the currency

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Rising wages: Is Wal-Mart a precursor?

Originally published on Reno Gazette Journal ‘s website, http://www.rgj.com/story/money/business/2015/03/06/rising-wages-wal-mart-precursor/24537471/

For the past 18 months, the labor markets have been telling us to be bullish on the U.S. economy as the healing in that market precipitated economic strength. Those who could read those signals had a significant time advantage in the markets, as those signs emerged months ahead of the now-official view of the Fed that the labor markets are healing. In fact, for several months, even into 2014, the Fed was using the “weak” labor market as the reason to keep its Zero Interest Rate Policy (ZIRP). (The February jobs data (+295,000), in the middle of another brutal winter, is just another sign of labor market strength.)

The Danger in Using “Averages”

Along those same lines, today’ s excuse to keep ZIRP is a lack of wage growth. Somewhat at

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