Monday, November 8, 2010

How Much Room to Run?

The bad weather has come to Massachusetts with some wet snow falling a bit west of here. It will not be long now.

How Much Room to Run?
I have been looking at markets quite a bit as of late and wanted to touch upon a dynamic that should be coming into play fairly soon.

By now most are aware that huge runs in equities, metals, and commodities have been reflected in a weakening dollar. The QE 2.0 talk that started this summer initiated a melt down in the buck and assets soared. It may be helpful to take a look at where we are. Here is a dollar index chart going back to 2008:

It should be readily apparent what we are looking at:
-the March 2009 lows in stocks were a top in the dollar
-the dollar was smashed during the run up in asset prices
-the buck was king kong again at the height of the Euro concerns and the summer slowdown
-QE 2.0 hopes have taken the dollar down once again

That's nice, but what does it mean?

Looking at the charts the dollar has found a continual bottom around 74, and maybe has touched 72 a few times over the years. I have seen discussions about the dollar breaking down under 70 and what that may mean. While I have little doubt the FED could lose control, I just do not see it happening. 74 or 72 will hold and by then the Euro mess may come back to the front pages.

Recent history has shown that a stronger dollar will be bad for stocks and most everything else. We are sitting at about 77 right now, so another 5% move can be expected to the downside for the dollar. This may not correlate to a 5% upside in other assets, it may well be more than that. What I am trying to show here is that the upside will be limited going forward. Unless.....

Asset classes decouple from the dollar dynamic that has been in play for some time. This is not impossible but I do find it unlikely. Still, this is something I am watching right now and will make plans accordingly. You will want to be watching at the 72-74 range for the dollar if a shift occurs. Many trades right now are very crowded and upon a reversal the exits could be jammed.

I am Not an Alarmist
My long held vision that the world will be over run with robots is not new, yet I am sure we have never been as close as we are now! Take a look at this wishful thinking from long ago:
News Article from 80 Years Ago Warns of the Impending Robot Age
Here is the scary vision from way back:

I think this was a bit premature. Now, not so much!

Have a good night.

5 comments:

GawainsGhost said...

Bye, bye Wade
Bye, bye impotence
Hello losingness
I think I'm-a gonna cry

Bye, bye Wade
Bye, bye faint confess
Hello empty nest
I feel like I could die
Bye, bye Coach Wade, goodbye

There go my Cowboys with someone new
He sure looks snappy, I sure am blue
They were my Cowboys till he stepped in
Goodbye to winning that might have been

Bye, bye Wade
Bye, bye impotence
Hello losingness
I think I'm-a gonna cry

Bye, bye Wade
Bye, bye faint confess
Hello empty nest
I feel like I could die
Bye, bye Coach Wade, goodbye

I'm through with football, I'm through with cheers
I'm through with counting the stars with years
And there's a reason why I'm so free
My bumbling Jerry is through with me

Bye, bye Wade
Bye, bye impotence
Hello losingness
I think I'm-a gonna cry

Bye, bye Wade
Bye, bye faint confess
Hello empty nest
I feel like I could die
Bye, bye Coach Wade, goodbye

Bye, bye Coach Wade, goodbye
Bye, bye Coach Wade, goodbye
Bye, bye Coach Wade

getyourselfconnected said...

Yeah I saw they canned him!

Can they get Cowher next year or will Garret keep the job?

Dave Narby said...

J6P is bullish on equities

Gold bugs are bullish

Dollar bears are bearish

What could go wrong?

getyourselfconnected said...

Hey Dave!

I am no dollar bull but the path of resistance is set. I am watching those levels and we shall see.

GawainsGhost said...

Well, with uncertainty surrounding the next CBA, there might not even be football in 2011. In that event, no OTAs, training camp, pre-season, it would be extremely difficult for a new head coach to come in, install his system and evaluate players. And he would have to be hired before the draft, which will take place, but without the ability to practice, what would be the point?

So, yeah, I think Garrett will be here through next year. And I can't stand him. This guy is clueless. His schemes are overly complicated and his play calls utterly predictable. He does not know how to utilize his personnel and cannot formulate a running game.

To my mind, he's a disaster waiting to happen. But the ultimate cause is Jerry the GM. This man has totally destroyed the team that I love. And not for the first time, mind you.

It is going to take years of rebuilding to restore the Dallas Cowboys to credibility.

But to answer your question, no, I don't think Cowher would take the job. He'd want too much control. And I wouldn't want him as head coach anyway. I just don't like him.

Gruden is a possibility. But my personal preference would be Harbaugh. Hire him away from Stanford and do everything necessary to draft Andrew Luck. Then start cutting players left and right. I'd put everybody on the trading block and rebuild from the inside, starting with the offensive and defensive lines, out.

That's what I'd do. But then I'm not Jerry Jones, and therein lies the problem.