Now that we are in the month of October, it appears it is running true to form in terms of providing a rough and rocky road immediately ahead. US stocks did not have a good week, neither did several currencies and gold declined further. The US dollar continued its display of strength and Morgan Stanley decided to get in the oil business by bidding on the strategic oil reserve so conveniently made available by Sir Slick himself. Perhaps it's the Klingons striking back. We need to remember that investing in such things as stocks and bonds, or in anything, with one exception, is dependant upon the strength, or weakness, of the currency within which the investment is denominated.
Currencies are what the value of the investment is expressed in.
Should the currency decline then so does the value of the investment. Consequently it is the value of the currency that is key, not the performance of a particular stock. Since the mid 80's we have had a floating exchange rate that in theory allows the market to set the value of the currency. Countries that run unacceptable balance sheets tend to be punished accordingly and since mid-1997 several currencies have been trashed. The floating exchange rate also allows large predatory hedge funds to inflict their particular form of piracy upon unsuspecting central banks and their respective governments.