Tuesday, August 12, 2008

Dollar Rally Over, (or nearly so)

The U.S. $ rally of the past 2 weeks is over. You saw it. Wow, the Euro is only $149! Think that is a bargain? You haven't been to Europe lately, have you.

"Correlation does not imply causation", as anyone with a modicum of mathematics in their background has had ground into them.

Still, in my business, we MUST seek the cause, and make our bets accordingly.

So, here is what I think:

I think the pre-election strategy of threatening to release oil from the U.S. Strategic Petroleum Supply, and; threatening to make Oil futures speculation more difficult and fraught with regulatory liability has had the desired effect - Lower Oil Prices.

The unintended consequence has been to strengthen the U.S.$ - TEMPORARILY (and if they meant to do this, I would be REALLY impressed, but considering interest rate policy I doubt that the US$ rise is any less of a surprise to the Fed than it was to me).

Why do I say temporarily? Has anything changed vis a vie our interest rate policy? Deficit spending? Can the U.S. economy survive the decline in its cheap-dollar-supported exports? NAFC. Ergo, this is temporary.

This has created some of the best opportunities in precious metals since Noah built himself a boat, not to mention the equities of Oil & Gas producers and the Oil Services complex. Can't name names, but I am LONG the group.

The U.S.$ is in just as bad of shape as ever, and the Fannie and Freddie bailout IS coming, and with it the bailout of the rest of the mortgage market. You have an opportunity here, and I think it is the LAST at these levels - use it wisely.

You heard it here first.

Mentatt (at) yahoo (d0t) com

P.S. Wall Street's money managers and salesmen will be telling you the all clear signal has been sounded. It hasn't. These guys should come with a Surgeon General's Warning: I am as dumb as a box of rocks.

Watch what the hedge fund guys are doing, and it ain't buying banks.

P.P.S. I got an email from an individual castigating me because Lehman is still in business, and Fannie and Freddie have not been nationalized yet, therefor I am an idiot, am ugly, and my mother dresses me funny. Talk about unreasonable expectations... Still, Lehman will not survive, and neither will Fannie or Freddie. Just take a look a their stock prices - this despite the fact that Paulson got the "baszooka" he wanted to bluff away the bad guys.

P.P.P.S. If I knew WHEN ANYTHING was going to happen EXACTLY, I wouldn't need my day gig, now would I?

1 comment:

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