Unemployment

Posted by Ray on October 1, 2009 under Main | Be the First to Comment

Unemployment tomorrow is going to be horrible, how do I know? Goldman upped its estimate from 200K to 250K and we know they got that direct line to treasury and those ‘advanced’ reports. Remember this happened in August as well and guess what, the numbers came in plus or minus 5% of Goldman’s estimates. I mean seriously, can you make it less obvious?

I did mean to post this earlier, so I am sorry, but if you followed my bearish tone then you would already own TIPS and 2 year treasuries and while you would not have done as well as equities you would have been up some 3.4% and 2%, respectively, in the recent months. That’s not too bad for bonds, but I even trimmed my exposure there just because things do not seem right. I did increase my exposure to PCY because it has been stable, it’s outside of the dollar, which will have a nice rally in the near-term, and I love emerging market debt. Outside of that when the dust settles I plan on jumping into the BRIC heavy and other foreign investments trying to leave anything exposed to US credit markets behind.

Of course, I will own some US stocks, but it will not be the largest holdings I have by any stretch of the imagination. As you all know this rally is done and rational thinking is about to bring us, in a very abrupt and radical way, back down to Earth. We have not had economic data that merited this type of rally to begin with, but what do I know. Anyhow, a couple of things made me chuckle, apparently Cramer, with his canny ability to pick losers, told everyone to buy CIT and Citi, CIT is dead and Citi is headed back to the $2 area.

The other vindication is the fact that David Rosenberg confirmed exactly what I have been saying all along about unemployment. During a credit collapse unemployment is a leading indicator, not a lagging indicator. I was beginning to think I was nuts, kidding of course, but hearing all the idiots on CNBC makes one nuts after awhile when you hear 550K a week job losses are a lagging indicator when the problem is defaults on loans and credit products, duh. I am still waiting to see the young idiot who debated Trim Tabs Charles Biderman last month claiming his economic indicators are “on fire” and GDP will be up”4 or 5% in the 3rd and 4Q09 and then some.” Based on the data from yesterday and the ISM today, car sales data, unemployment and pick any other horrendous data point you want I certainly don’t see 4 or 5% GDP growth any time in the near future, but that asshat did. Yeah, our educational system is fine when we are turning out clowns like that.

Yet, guess who continues to astonish me? Mr. Doom and Gloom himself Marc Faber who said things are bad, but said in March that we will have a major rally before a selloff happens again. Hmm, guess what seems to be happening? As evidence of his holinesses rightness I have included recent videos confirming it below, enjoy.

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The Dollar

Posted by Ray on July 22, 2009 under Markets, The Federal Reserve | Be the First to Comment

As many of you know I have been pointing out the correlation between the weak dollar and higher equity prices. This has caught on and ZeroHedge has even made the connection between the two. Simply put, we are seeing the devaluation of the dollar which leads to higher equity prices and commodity prices, or inflation.

For full disclosure I am short the dollar against most major currencies, i.e. Euro, New Zealand Dollar, Canadian Dollar, and the Pound.

Here is the DXY, dollar index, versus the S&P 500 over the last year.

Here is the DXY on its own, pretty ugly:

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Why the dollar is strengthening today

Posted by Ray on July 6, 2009 under Main, Markets, The Federal Reserve | Be the First to Comment

With all of the talk of the dollar’s decline, including our own predictions, you might be questioning why it is increasing in value today. Like it or not, and we DO like it, the USD is the reserve currency still and has the deepest and most liquid market in the world. That will not change and we know we will always pay our debt, but it will more than likely be in dollars that are debased.

When the economy or world economy seems like it is hitting a road bump people buy safety, in this case and in the fall of 2008 the safest investment is the US dollar. Do not confuse safety with security though, the dollar is safe as in you will get it back, but it is currently not safe as to the value of the dollar you will get back. In other words, the dollar, longer term, will be worth less and most of these “flight to quality trades” are short-term holdings.

On top of that, the Chinese talked up the dollar right after they bashed it last week. We strongly recommend diversifying currencies and take advantage of the current strength. We like the Yuan, Canadian dollar, and even the Australian Dollar is OK. Also, we are 70% cash and the rest is in TIP’s, a small portion in the S&P 500, high yield bonds and emerging markets.

One last thing, notice that the dollar strengthened and the market’s weakened? Again, a short-term correlation, but relevant right now.

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