<puzzled by the bets against the dollar>
I don't think "puzzled" is quite the right term for me to use, as funds and specs being Big USD short is quite rational, we are in Crack-Up Boom atmosphere, with totally irresponsible CBs in the US and Asia, who have green lighted them. There will almost always be fund anti-USD positions as long as Bernanke and Greenspan are around. But when I see very large fund and spec positions lined up (overly geared): short USD, long Precious Metals (unlike base metals, Comex inventories are increasing, not declining), bets on lower rates, then I have to ask how much more can those run, and what's the risk?
Spec and Fund positions:
FX subtotal: long (meaning foreign currencies) 237,779
Gold: long 199,179
Eurodollar: long 152,863
Five year Treasury: long 138,302
S&P subtotal: long 61,802
Corn: short 118,646
64.82.65.31
Secondly, it tells me there will be hard liquidations if there is surprise or sentiment shift (what Kindleberger calls, "displacement"). Thirdly, I think there will be a surprise to flush those fund positions. It may be the Asian buyer strike, or Reflux that I smell coming, or it could be as simple as two rate hikes (accompanied by lots of MoP talk)by year end instead of one. Right now the fed futures market only sees one:
trendmacro.com
To me the best for the money Flucht in die Sachwerte trades as of now are grains (especially corn, as specs are near record short, and there's little incentive to plant next spring), copper (already was subjected to a big spec liquidation of 18,000 contracts, declining, and very low inventories), short the stock market, and short the 5 year. I see gold (and the USD) picking up a good bid on any declines, but my preferred strategy in PMs has always been very aggressive and beta leveraged, using names like MNG, CLG, AGI.to, so I can't afford to be complacent, as those can drop 20% in a flash.
stockcharts.com[l,a]daclniay[pd20,2!b50][vc60][iUc20!Lf]&pref=G
I bought a bunch of MNG below a buck, sold a bunch at 1.42, and see 1.26 as support. And in forex I'm using leverage and futures in AD, JY, and possibly GBP, so again can't afford to be pushing the envelope when I see the present set-up. |
