Archive - Oct 6, 2009 - Blog entry

Forget fundamentals. Hedge fund flows, investment banking flows, sovereign wealth fund flows, pension flows, and retail speculation will drive equities and other risk assets much higher. How long can it last? Remember the famous quote from John Maynard Keynes: "The market can stay irrational longer than you can stay solvent."

Dear Congressional Aides:

Here are the questions which should be asked of Gary Gensler and Henry Hu in tomorrow's hearing before the House Committee on Financial Services

The move in gold to new 18 month highs has not been confirmed by backwardation in the gold basis. Caution is warranted for leveraged traders.

In the 1980s, in Soviet Russia, a few times a year, my class walked to a movie theater, where we were shown a documentary. Attendance was mandatory. The documentaries were different but the themes were the same: to the accompaniment of patriotic music, we learned about the righteousness of socialism, the greatness of Mother Russia, and the intelligence and foresight of our great leaders.

True to form for 2009, anyone trading with a close eye on the fundamentals is getting a major hurt put on, while buying any dip to minor support, such as the 50 day MA, remains as viable a strategy as the most sophisticated SPARC assembly language-optimized HFT algorithm. The order has come down from above, once again today (as it did yesterday), that sellers ain't welcome.

The short answer is...

Yes, probably.

The dollar will go way up the next time the stock market crashes or during the next leg of the financial crisis . . . but will tank long-term.