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Random Thoughts: Dollar In Decline


Significant implications to greenback reversal.


Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community. See also Seduction, Corruption and Redemption.

The Hump Day Cometh! - 9:31 am

And so it is, another weekly midpoint is upon us as we ready anew for the world's wildest reality show. Following yesterday's Hot Popper--did everyone burn their tongue when eating those nasty things?--traders await the 2:15 EST toggle that is the FOMC rate decision.

Interest rate policy ain't what it used to be--it's sorta like bringing a knife to a gun fight--but with structural and psychological metrics vying for our collective attention, we'll attempt to fit the million little pieces of this complicated puzzle together. Before we dive in for the spin, I'll draw your attention to Pep's fantastic 5 Things from yesterday, which touches on a few important thoughts as the boys meet on the Beltway.

It's been over a year since we offered that if the wheels wobbled on the financial wagon, you were well warned. The premise of that piece was the credibility of our policy makers and faith in the system. More recently, as we asked if The Big One Was Coming, we eyed the laws of diminishing ammunition and asked if the last bullet would be be pointed inward. That discussion is gaining steam around the Street following the massive financial meltdown.

This morning, my missive was written with a broader lens in mind as we waffle through the seduction, corruption and redemption that we, the people, are enduring. While the nuts and guts consume us daily, the big picture solution, for lack of a better word, is to rebuild our standing on a global stage with a dose of humility and a touch of humanity. We can and will get there, Minyans, it'll just take some time.

I'll be back in a flash with some thoughts on the day, Minyans, so hit 'em hard and fare ye well.

Gate Sniffage! - 10:04 am

  • The standout action thus far? The greenback, which got waxed into yesterday's close and is continuing its decline this morning (DXY -2%).

  • Remember Minyans, this is a key tell in our "asset class deflation vs. dollar devaluation" discussion. It doesn't guarantee higher asset classes, but it's a likely dynamic if the upside schtick will stick.

  • With that in mind and much respected, I would be remiss if I didn't remind ye faithful that the sharpest rallies occur in the context of a bear market.

  • I picked up chatter of a massive asset allocation yesterday. We look forward in the 'Ville, not back, but I'll mention it so it remains on our collective radar.

  • Freddy Mishkin, the former Fed governor, is saying today hat deflation is a bigger concern than inflation. Geez, thanks scoop--we wish we thought of that in January.

  • I entered today's fray with a snivlet of gold and a spate of crude. I've made partial sales as a function of discipline as the mechanics of the swing trump the results of the at-bat.

  • I'll be at an off-site Minyanville meld tomorrow and Friday and you know playin' blindman's bluff is a little baby's game.

  • Fed fund futes are fully pricing in a 25 bip snip, 62% chance of a 50 bip snip and 38% of a 75 bip snip. My money is in the middle, for what it's worth.

  • According to the WSJ, net redemptions from stock mutual funds are on track to hit an all-time high this month.

  • Lost in yesterday's upside sauce was the notable lag in the the financials. They're listening to fresh chin music this morning as Mother Morgan (MS) is off 10%, Goldman (GS) is 4% lower and Citi (C) and JP Morgan (JPM) are down a deuce each.

  • Remember, Apple (AAPL) $115 is pretty significant resistance if you care about that sorta thing.

  • We're keeping Halloween in MinyanLand open all weekend for the 250,000 critter kids. We're awarding double the money for all games played and quizzes taken on Friday, Saturday and Sunday. It's a great weekend for Mini-Minyans to snap up spooky collectibles we've hidden and earn lots of MinyanMoney.

  • Lots going on Minyans, so lemme get this out and I'll circle back in a bit. And SMILE yo, it could be worse and for many people, it already is.

Of Dries and Tries - 10:32 am

This past spring, while dining with Jeff Saut and Kevin Depew, we were joined by a hot shot hedge fund manager who espoused the virtues of Dryships (DRYS) through the lens of globalization. I never traded the name but since that chat and chew, I watched it drop from $110 to the current level of $14 and change.

It's never a good idea to buy a stock simply because it's lower. In many cases, it had no business being at those elevated levels to begin with. However, with dollar getting hammered--a meaningful reversal in Our Wishbone World--I took a little nibble as I read and hear the equity epitaph all over the Street.

It's NOT advice, Minyans, I'm simply sharing my process with hopes it adds to yours. I'm using a nice and tight stop under the recent lows and will trail it higher if given the chance.


Did you know the doors to Festivus 2008 are officially open? Have you yet locked your spot for the critter trot as last year's soiree sold out? (This is our annual event to commingle our professors, partners and Minyans while chowing down and listening to live music. The very best part? It's for the kids in the good name of my grandfather.)

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