Wednesday, March 2, 2011

Dow Jones' $13,000

The dollar continues to fail as a risk asset today as it is currently down 1%. The trade was very choppy yesterday. It might be capitulating. If this is the case, the trend line suggests the dollar as the DXY could test a new support level, presumably around DXY 75. The main problem right now for the dollar is that it has never had support at any level beyond this point. In other words, it has no experience dealing with all other assets while it is below 77. Coupled with thes significantly higher oil prices, gold prices, commodity prices, and real estate which may be bottoming in areas with upside.

Platinum has broken resistance!  It is heading for $2200.  So now it is platinum and silver breaking way ahead, with gold and oil a few steps behind.  Gold is sure to catch up with the sister metals, and with the world turmoil, oil is also going to keep pace.  Platinum is a heavily manipulated investment due to the small bullion market, but with demand high, it could trigger a supply shortage.  As platinum is past its peak production ('09) there would be no solution except extravagantly higher prices.  Is this the first stage of this trend?  It is quite possibly.

As Africa unites under various factions, the oil trade could push prices higher. Gold being an asset, the only good one, on all Central Banks assets can not go down without significant pressure being placed on their bank sheets. Assets must equal liabilities....ALWAYS. Food has been leveraged up, and there is some room for downside action now, but if it is in a bull market, food could go higher. If oil goes higher by the way, food WILL go higher. So here once again we see trades that could be highly profitable. We should try and find the risks though.

How could the dollar reestablish itself as a risk asset? If the Federal Reserve raised interest rates, then the dollar would have to go up, right? Problem is, if the rate was raised, thyen the interest on the dollar would surely bankrupt the Treasurie. So this IS NOT DOLLAR BULLISH. The dollar will not profit from raised interest rates. Is there any scenario where the dollar could benefit? The only one is if Equity pulls back and goes to cash. This could pull the agrigate monie supply as velocity would slow. This is why one's cash position should equal their equity position; unless the cash has just been recently deployed on a pulllback as to purchase equity/other.

If the only way the doolar can rebound is an equity pullback, what are the chances of that happening?  There are many sectors in the economy that are weak right now.  There are so many bad stocks on emerging markets that I am sure foreign equity could dry up.  Also there is the for profit education schools, and public education, as those who have even graduated college are finding it hard, which is not suppose to happen in the First World.  P/E is high, and so is volatility.  They may steadily even each other out, but with the fiat printing press on high, who knows what the metric will be for the future to come.

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