If you are a deflationist, you gotta be worried about the US$. I can absolutely, possitively assure you that the U.S. equity market cannot continue up while the US$ continues down for very long.
Here is a link to the UUP (it doubles the percentage movement of the US$ vs the 6 biggest currencies, but the proportions are correct).
The Dollar Index (trades on the CBOE) is down to $78 and change, and its is only $6, or a little over 8% from its ALL TIME LOW.
My bet is you would be better in cash than equities... and I better be right... because if the US$ breaks below $72.30 in the Dollar Index then our trading partners are NOT BUYING TH B*ll Sh*t. This does not mean that the US$ AND the equity market cannot go down at the same time. The MS thinks that that event would mark the end of the end (or was it the beginning of the end? You'll have to read his blog), and I am inclined to agree.
BTW... you Obamaphiles... Notice anything on the chart? The US$ has been in consistent decline since election day (with a head fake for the stim pack). Does that tell you anything?
I can't give specific trading advice in this forum, but I used this rally to unload my equity positions, and I covered my precious metals with tight or in the money calls... does not mean I am that I am right, but this is how I see the next few weeks...
Yours for a better world,
Mentatt (at) yahoo (d0t) com
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6 comments:
G:
Corn hitting new lows. Copper hitting highs since last fall. Silver still in the tank. Gold doing nothing. Dollar bouncing. Equities reversing slightly. Oil stable. Lots of crosscurrents.
LD
Like I've said before, you can have inflation and deflation at the same time; they are not mutually exclusive. Inflation is the devaluation of money, deflation comes from a slowing down in the circulation of money. Solving deflation by printing more money (to compensate for the slowdown in circulation) sort-of works for a while but doesn't solve the underlying problem, and creates inflation too.
If I was in dollars I'd buy long term oil - it's effectively international and it can only go up longterm.
I think you're right, equities are in dollars and the dollars falling, and equities can only fall too - hard, I think.
Early frost for all those Green Shoots! Take the long view!
Lenny:
Rough out there... Silver continues to surprise...
Corn a bargain - at least i think so (and I have been known to change my mind).
The 10-year bond is still paying 3.6% interest (very low). I think the suckers are still buying our Treasuries, and as long as they do ... we're happy.
thanks for the information....
___________________
Sharon
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If the dollar rallies, equities will NOT go up. With a dollar devaluation, it can go either way.
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