The U.S. dollar is plunging for two reasons: 1) interest rates in the U.S. are at or near historic lows, and 2) corporate America's earnings estimates are an absolute joke.
As you hunker down and savor these thoughts, I intend to continue over-weighting my stock portfolio with small caps -- as corporate America collapses, savvy investors are going to realize that small companies with simple balance sheets and well-defined product and service lines are the only places that produce anything close to reliable financial reports.
I'd add 3: There's some uncertanty over whether or not there will be another terrorist attack in the US.
Good post, Alberta's Child! It just so happens that I'm big on 4 things myself: Cash, Small caps, mid caps, and a little physical precious metal. I've always been a bit conservative with investments anyways, though I was lucky enough to rebalance my 401k more heavily towards cash in Feb of 2000.
That's an interesting point, but I think this point tends to be overemphasized. When you think about it, what good will it do anyone to have yen or euros in their pockets if the world's largest, most affluent consumer base is under duress? I think any savvy investor will realize that the rest of the world would be impacted by a terrorist attack on the U.S. far more than the U.S. would be impacted itself.
As I look at all of the indicators I see a declining stock market and a declining dollar, but a robust real estate market and unemployment rates that are the envy of the world. Maybe I'm wrong, but it seems to me that the rest of the world is telling us that our government is sh!t and our major corporations are sh!t, but our nation is still very strong.