IE 11 is not supported. For an optimal experience visit our site on another browser.

‘SNL’ skit suggests dollar's perils are over

You know the dollar's decline may be coming to an end when the currency becomes the butt of humor on America's most renowned TV comedy show.
/ Source: Reuters

You know the dollar's decline may be coming to an end when the currency becomes the butt of humor on America's most renowned TV comedy show.

Just as John Q Public's emergence as an expert stock picker signaled the end of the Internet bubble of the late 1990s, this claim may be nothing more than a variation on the belief that once every man and his dog is in on it, the trend is over.

The coup de grace for dollar bears may have come last weekend when “Saturday Night Live,” a comedy institution that's been running on U.S. network television for 30 years, included a skit on the dollar in its most recent episode.

With cast members dressed up as various currencies, the skit showed the small and weakly dollar being bullied and ridiculed by the bigger and brasher euro, yen and sterling. Even the Mexican peso joined the act — a strange choice perhaps given that the currency has continued to weaken against the dollar in recent years, albeit it at a more modest pace than at the time of the 1994-95 Mexican currency crisis.

And evidence is mounting to suggest the weak dollar story has filtered into the consciousness of millions of ordinary Americans.

Analyses and editorials on the sickly dollar are no longer the preserve of financial publications like the Wall Street Journal, Business Week or Forbes.

Daily newspapers, even the tabloids, which publish articles on foreign exchange as often as they do ballet reviews or cryptic crosswords, have taken to commenting on the beleaguered U.S. currency's outlook.

The dollar's plight is the subject of satirical cartoons and often among the top news items on popular Internet search engines like Yahoo.

But if the dollar has taken on a pariah status among the world's currencies and become the butt of jokes on one of the nation's most respected and popular comedy TV shows, might it be time to start buying?

"It suggests things have gone pretty far and that the trade has run as far as it will go," said David Gilmore, partner at FX Analytics, a research firm based in Essex, Conn.

But Gilmore expects the dollar's reprieve to be only temporary, before downward pressure from ballooning U.S. deficits reasserts itself and the selling resumes.

Magazine cover effect
The dollar has shed around a third of its value against the euro and a broader basket of currencies over the last three years. But almost on cue, “Saturday Night Live's” dollar-bashing came as the dollar's rebound this month gathered momentum.

Andrew Chaveriat, technical analyst at BNP Paribas in New York, describes the dollar's prominence in the general news sphere and even popular culture, as the "magazine cover effect".

"It's really just a reflection of something broader, mass psychology: If Saturday Night Live is saying sell it, you can be sure we're in the last stages of this (downturn)," he said.

Jim Rodgers, who co-founded the Quantum fund with George Soros, recognized this heady mix of greed, hysteria and herd mentality taking hold of investors and financial markets.

In the book “Market Wizards: Interviews With Top Traders,” Jack D. Schwager quotes Rodgers as saying: “It's always the same cycle. When a market is low, there comes a time when people buy it because it has become undervalued. ... In the next stage, people buy it because it has been the thing to do. ... Finally, there comes the magical stage: People are hysterical to buy, because they know the market is going to go up forever. ... The whole process repeats itself on the downside.”

The best illustration of this process is the tale of Joe Kennedy, President John F. Kennedy's father, who ordered his broker J.P. Morgan to liquidate all his holdings the week before the 1929 crash after receiving stock tips from the man who shined his shoes.

“When the shoeshine boy starts giving you tips, it is time to be out of the market,” Kennedy reportedly told his wife.

While the chances of a dollar crash remain pretty remote, a massive snap-back rally is equally unlikely, analysts say.

But given its new prominence on late-night comedy TV maybe the worst for the dollar is over — at least for now.