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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: sylvester80 who wrote (38607)3/7/2002 1:54:08 PM
From: orkrious  Read Replies (6) of 99280
 
from RealMoneyPro at TSCM. David Rocker is excellent.
if the dollar doesn't stabilize, this market is going to get annihilated. Just shorted some COF on this analysis.
RMpro is worth the cost.

David Rocker
Emerging dollar weakness a negative for interest rates and rate sensitive stocks

3/07/02 11:57 AM EST

In the last several days the dollar has been weakening against other currencies,especially the yen. If this trend persists, this is a decided negative for interest rates as foreigners, who have endlessly financed our current account deficit, will demand a premium to compensate for the currency risk. This is already happening and rates across the yield curve have been rising.. Rising interest rates clearly threaten the strength and longevity of this nascent economic recovery. There are lots of ways to play this but one is to short the subprime lenders like ACF and MXT that have risen so sharply in the last several weeks on the assumption that credit quality will improve in an expanding economy. Higher rates will increase their funding costs,tighten their spreads, and,by slowing the economy, increase the likelihood of persistent and worsening credit losses. Conseco's current problems are already testimony to the difficult conditions of subprime lenders. For the moment, the market has chosen to ignore this. The euphoria that has accompanied this modest economic rebound seems likely to get some cold water dashed on it unless the dollar and interest rates reverse current trends
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