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Freaky Friday Potpourri: Why the Lower Dollar Isn't an All-Clear


Equities need a lower greenback to rally but it's very possible for it to slip and stocks to follow.

"Inspiration, move me brightly. Light the song with sense and color; hold away despair."
- Grateful Dead

There are moments in life you never forget; sometimes they arrive rather unexpectedly.

I attended an affair Wednesday night to celebrate Pete Moses, who is retiring after 40 years at the helm of The Children's Aid Society. Minyans know Pete through his "Business of Giving" articles and I'm fortunate to call him a friend. He introduces me as his "brother" but I'll take it one step further; the man is, in a word, "Rubyesque."

Trying to sum up Pete in a short-form article is like trying to explain the sunset to a blind man. His passion and purpose in affecting positive change-sometimes with tough love-is an inspiration to the many lives he's touched. The teens that had nowhere to go, the after-school programs, the innovative juvenile justice programming-the list goes on and on and on.

We often talk about the positive pebble in the proverbial pond of life. Pete, to me, is the epitome of that. It's one thing to devote your life to making a difference yet entirely more powerful when you inspire others to do the same. I can assure you that once you catch the "giving bug" from Pete, it stays with you for life.

On December 4th, 2009, the Minyanville community will gather and do our part to give back. We'll honor our fallen friend Bennet Sedacca with the announcement of his memorial scholarship and we'll again raise funds for The Children's Aid Society, toasting Pete in the process. In this day and age, a little effort goes a long way; perhaps all the way to better days.

T-Minus 21 days; engine room, more steam!

Random Thoughts:

  • Raise your hand if you think the "Lower dollar? Close your eyes and buy 'em!" is a wee bit crowded.

  • With everyone and their sister conditioned to believe a lower dollar will jack equities, this is your friendly Minyanville reminder that a grubby greenback is a necessary precursor to-but no guarantor of-higher asset classes.

  • In other words, equities need a lower dollar to rally but it's very possible for the greenback to slip and stocks to follow. We need only look back to 2007 for graphical evidence of this dynamic.

  • With the carry trade front page news-and the entire free world monitoring the dynamic we've highlighted for years-I can't help wonder how the path of maximum frustration will unfold?

  • Remember when most folks thought lower commodity prices were good for stocks? We caught a fair amount of grief for expressing a variant view, which is now conventional wisdom.

  • Question conventional wisdom; just understand it sometimes takes years for the crowd to come around. Case in point the invisible hand; it was "highly conspiratorial" until our former Treasury Secretary fingered it as a central policy tool in 2007.

  • I'm long humility-short hubris, in size.

  • The S&P and NDX trendlines-drawn with a crayon-remain in place.

  • Minyan Peter makes a good point regarding deal activity at tops (Time Warner/AOL (TWX)) and bottoms (Bank America-Merrill Lynch (BAC)). That said, I'm on the lookout for deals and share buybacks as incremental tells for the manifestation of the bull market thesis.

  • The most inclusive definition of unemployment (the "U6," which measures all forms of those unemployed and underemployed) is already at 17.5%, according to uber-economist David Rosenberg of Gluskin, Sheff, who opines the unemployment rate will "very likely make new highs long after the recession is over-perhaps even years."

  • Move over Mr. T? The last time Lou Dobbs left CNN was April 1999 to create a start-up. Ten years later (with the S&P almost 200 points lower), he's leaving to pursue other interests. Telling? Only time will tell.

  • Good news! Between Hewlett Packard (HPQ) and Wal-Mart (WMT)-and some M&A as added sweetener-yesterday's tape had every excuse to stretch its legs to the upside. The reaction to news was entirely more telling than the news itself.

  • If you missed it, Pep and Bob Prechter offer some valuable food for thought.

  • N-V-T-S Nuts! Memoirs has thus far garnered 1,500,000 page views on Minyanville, MarketWatch and China.

  • Is that 3,000,000 eyeballs? I certainly didn't mean any disrespect to pirates or for that matter, Sammy Davi....wait, INSENSITIVE! (moving on)

  • Boo will likely try to turn the screws one more time but if he can't dent the bullish bent, S&P 1120ish becomes the "melt-up" line in the sand into year-end.

  • DJIA 10,340 is a fitty-percent retracement of the entire Dow decline (from the 2007 top) for those who follow such things. I personally put the Dow in the "pay no mind" club as its "thin representation" of the market but most folks measure the market by it so it warrants a mention as we edge forward.

  • We've got room but please "see" the vacuum created by the Monday morning upside gap, which comes into play under S&P 1080.

Some Answers I Really Wanna Know

  • Is Phillip Seymour Hoffman the best actor of our generation?

  • Can anyone point to a "correlation trade" that hasn't eventually unwound in a most painful way?

  • Computer models are likely a driver of the "dollar vs. everything else" carry trade. While we must respect that dynamic, wouldn't we be wise to remember that computer models once got LTCM in a whole mess of trouble?

  • Will you stuff a stocking with The Power of the Invisible Sun?

  • Are municipalities the next shoe to drop?

  • And by extension the next bailout on the horizon?

  • What might the downside catalyst be? State bankruptcies? Swine flu? Commercial real estate?

  • How about "exhaustion," which was the case in 1987, 2000 and 2007?

  • If everyone has the same trade on, what happens if they all try to exit at once?

  • Does the word "bottleneck" pop into anyone else's head?

  • Are we jumping the gun or avoiding one?

  • Are we there yet?


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