[Claeren]

EXCELLENT article about how comparative currency value/solvency is (and will continue to be) driving the stock market valuations:

http://www.minyanville.com/articles/.../index/a/20123

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Secondly, stock prices are being driven more and more by currency movements. Why is this? As governments take on more and more risk, as they price more and more assets for the market, and as they transfer debt from private to public, the common denominator, or release valve, becomes the currency.

When a government that can create its own money becomes insolvent, it is manifest in a a much lower currency. Ironically it is manifest in a higher currency in the first stages as debt is destroyed. But as government take on more and more assets financed by printed dollars it becomes weaker. We are seeing that struggle play out each day. When the dollar goes up due to deflationary pressures, stocks go down. When the government replaces debt with its own by printing currency and takes the risk as it did with the Citigroup (C) bailout (a huge amount for one company), the amount of dollars printed to finance the bailout causes the dollar to drop and stocks to go up.

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Claeren.