Yes it sounds wrong but remember the spanish language is completely opposite of our english language. So sometimes they say words we would say forwards, backwards.
EG Toothbrush
IN SPANISH: cepillo de dientes
TRANSLATION INTO ENGLISH: brush of tooth.
Cux answered Friday August 31 2007, 9:25 am: iHola!
The word "de" is very interesting. Haha- I love it. Yes, it does mean "of"- but I'm not sure about "with". With is usually "con"- for example: "Salsa con queso" is "Salsa with cheese". If you were to say "Salsa de queso" it would literally mean "Salsa of cheese"- meaning in English- "Cheese salsa".
"De" is a preposition- as you said. For example- "Soy de Estados Unidos"- "I am of/from the United States".
**EDIT**
Sorry- I realized that I didn't use "de" as a preposition really in this example:
"Estoy a la derecha de su" = "I am to the right of you".
"De" can indicate the material of something also- so for example "Los bluejeans son de algodon" means "The bluejeans are [of] cotton".
"De" has, I'm sure, a few other meanings, but I'm pretty sure that it DOESN'T mean "with"- that's what the lovely "con" is for =D.
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