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Holler at the Dollar

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This morning, all eyes are on the greenback.

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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.


The standout action this morning, through my "here for now, gone by 11 to DC" eyes is the greenback. We've spoken all week about the importance of DXY 85.5-85 as near-term support through the lens of "asset class deflation vs. dollar devaluation" and, while it's a big picture dynamic, we know that the big picture is always made up of many smaller ones.

Pulling back the aperture, we get a clearer picture of what we're talking about. Since 2002, the greenback devalued 40% versus a basket of world currencies. While we saw the disturbing writing on the wall in August 2007, the carnage picked up in pace when the dollar poked through the downtrend line this past summer.

Call it cause, call it affect but don't call it a coincidence. As such, this near-term break, while likely a counter-trend rally in the broader secular theme of deflation, could lend a bid to commodities and equities alike, perhaps into year-end.

Some Random Thoughts:

  • The Yankees sign C.C. Sabathia for seven years at $161 million? I've had pinstripes since I was in a crib but they sure are making it hard to root, root, root for the home team in The Age of Austerity.

  • Shrinkage? The global hedge fund industry lost $64 billion in the month of November, according to Eurekahedge Pte. I'll again offer that 50% of this industry will likely disappear and those that survive will shift to a three year aggregate return model sans annual high water marks.

  • Are we done Nyet? Keep Russia on your radar for a few reasons, one of which is the rubble, er, ruble, which has now been devalued five times in the last month. Where there's smoke, there's fire and we should keep close tabs as the Red spreads.

  • As I'm leaving in a few hours and out next week, I'm light and tight sans some upside energy bets. If I were here, however, I would look at General Electric (GE) as a short against some of my other exposure.

  • Remember: General Motors (GM), Ford (F), GE... they're all bearded financials--or financials in drag--and there is a difference between taking drugs to mask the pain and the legitimate medicine of time and price.

  • Lemme hop to get this out to ye faithful. As always, I hope this finds you well.




R.P.

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