And we are off!
AA beat earnings yesterday and the dollar continued to dive to the lowest level since July of 2008, when the $168Bn Bush stimulus package was considered highly inflationary but that didn’t stop oil from diving from $147.90 on July 1st all the way down to $35.13 in December and it didn’t stop gold from falling from $989.60 all the way down to $681 as quickly as October. Gold has me particularly worried at the moment because half the investors are piling into low interest T-Bills and half the investors are putting all their money into shiny bits of metal and no matter what happens, half the investors are going to be very, very wrong.
Nonetheless, today seemed as good a time as any to put up a new Watch List for Members as we are way too bearish if we are going to make new closing highs and we need to balance out with some more bullish positions. We’ll be looking for action that beats our best September closes of Dow 9,829, S&P 1,071, Nas 2,146, NYSE 7,047 and RUT 620 to confirm that this really is a new rally and not just the double top we’ve been thinking it was. Our plan for today is to roll our short plays along as October if we are clearing those levels but, otherwise, we will simply be scaling in and rolling our long put covers higher.
My overriding concern is still that the dollar is way too low and although it’s making China happy (their Yuan is pegged to the dollar so Chinese exports are super-cheap again), it’s making Japan miserable and Europe is starting to get very nervous as well. Remember that China played this perfectly as they stockpiled 50% of the world’s annual supply of copper earlier this year as well as many other precious metals and then they began making comments that took down the dollar, giving them a huge windfall on their trading.
Of course China is only the 7th largest Soveriegn Wealth Fund playing our markets with the cash we’ve sent them over the years. China’s 3 SWFs rank only behind the UAS combined $709Bn from the Abu Dhabi Investment Authority and the ICD. Saudi Arabia’s has just the one $431Bn SAMA Foreign Holdings to represent their interest in global commodity bidding. China and the UAE are eclipsed only by our own Goldman Sachs (technically not a government fund despite the…