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Investing Specialists

Will a Weak Eurozone Derail the U.S.?

Morningstar's Bob Johnson examines the possible direct and indirect side effects of Europe's debt ailments.

This week it is more of the same: great news from the U.S. economy but a flagging stock market as Europe continues to struggle and the euro erodes.

Views on the Dollar Change on a Dime 
Just a few months ago the popular press was filled with articles about how to hedge one's exposure to the U.S. dollar. I have long believed that higher productivity, more favorable demographics, and greater labor flexibility would make for a stronger dollar in the years ahead. However, I had no idea that the cracks in the European system would be exposed this quickly and that the dollar would rebound this strongly.

European Leaders Fail to Find a Common Voice
The euro has now fallen from a high of EUR 1.6 per $1 to EUR 1.24 per $1--which is where it was way back in 2008. Despite excitement over the European bailout plan earlier in the week, enthusiasm quickly faded as individual countries fretted about implementing austerity plans and politicians began to more openly worry about the euro's demise. There was even a rumor (later denied) that French president Sarkozy threatened to take France off the euro. It certainly didn't help that the chief executive of  Deutsche Bank (DB) publicly questioned Greece's ability to repay its debts in a televised comment.