Just a little commentary tonight!
Is anyone as tired of speculators as I am? I can't wait until I see the day where these specs run out of cash. Its inevitable! Why? How many casinos can you walk into where you can beat "the house" by speculating? Uhh 0?
Gamblers in the markets eventually take too much risk and get caught in a bad trade. How many trading accounts have been blown out by the reversal in commodities? You can bet(no pun intended) that number is very high.
This gets me to my point tonight. Gold dropped another $30 today as the currency continues to strengthen. This is the big trade in the commodity markets: Long the dollar/short gold. This trade has been a homerun the last few weeks. As a result, its success caught the eye of the speculators who are now all piling into the same trade. If you can't beat em join em right? Its about the only thing thats working in the markets right now. This is what makes this a dangerous trade. You have seen what the speculators can do when something gets hot in the markets.
The combination of greed and risk taking by the speculators makes any sandbox they decide to play in a dangerous place to play. If they get into your box, get out before you end up with sand in your pants.
Remember what happened to home prices when the house flippers came calling? How about watching oil double in a few weeks from$70-$140 before reversing back to $100 in a matter of weeks. Stay away from these thieves. Your trades will end up in tears just like the homebuyers who bought in 2005/06.
Like any other Ponzi scheme, if your in early its profitable, but if your late or don't know when to get out you end up with empty pockets.
Its pretty obvious the specs are sitting in the US dollar and shorting gold. My advice is to stay away from both because its already late in the game. When these trades reverse its frightening how violent they are!
Think about it. Why would the dollar be going up after the government just intervened with the mother of all bailouts. I can't think of anything that could be more inflationary. We also have historically low interest rates to boot. It makes no sense when you look at the fundementals, but who said the fundamentals mean anything in this filthy snake pit we call the stock market.
Now these long dollar boys will tell you they are buying the dollar because we were the first ones into the recession which means we will be the first ones out on the other end.
Ummmm..Yeah...OK...NOT! IMO this is a pretty weak arguement for going long the dollar. This trade may continue to work for a little while longer but watchout! When this trade stops working, and the specs find another sand box to play in, I expect to see a nasty cratering in the dollar and a surge in gold.
Please note that the long dollar trade could still have legs. We all know how good the specs are at keeping the game going. I wouldn't go near it here because they are still playing in the sand. However, if I see a trend going the other way, I'm a buyer of Euro's and/or gold.