Tuesday, October 5, 2010

A Quick Warning

A few comments on the price action today so far.  I see warning signs all over the place.

First of all the long bonds are not selling off nearly as hard as they should ne considering this huge stock rally.  This is NOT a good sign.  Take a look at the 30 year:

The dollar however is selling off hard:

Oil is also soaring on the weaker dollar news.  We are now back over the $82 per barrel level.  Folks, the economy will be stopped dead in it's tracks if we get back over $100.

Gold and silver are soaring as they respond to the move in the dollar.  It's also reacting to last nights Japanese interest rate cut.  The market is pricing in some huge inflationary risks here as the central banks race to the bottom with their currencies.

The market is moving higher on the weaker dollar but we have seen this game before.  This works for the market until the surging cost of commodities like oil collapse the consumers discretionary income. 

The 53.2 ISM number helped the market a tad as well but I don't think the market is moving on this because the number was hardly inpressive.

Buyer of stocks beware here.  The pricing action we are seeing here is a monetary phenomenon and It's EXTREMELY dangerous.  The central banks are playing with fire with all of these currency wars. 

The moves in the bond market tell you they are not comfortable with the dollar action.  The short end help up well today and the long end did to.

Why aren't the bond guys asking themselves:  Why hold a long bond priced in dollars if the dollar is going into the crapper?

Today's action is confusing to say the least.

It's been a great day for my portfolio which is invested for inflation so I am not complaining, but I thought it was important to note the distortions that we are seeing out there.

The market is increasingly becoming a VERY juicy short.

Until later today!

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