Friday, August 08, 2008

The Lazarus USD

Mid Day Tulip
Peggy Abrams

I believe in general in a dualism between facts and the ideas of those facts in human heads.
George Santayana

Is that quote not the truth?

I've been abandoned by my family (overnight river float) and left to my own devices. I'll state that my devices are a bit more benign than those of John Edwards. I'm still of the mind that private matters by public people are still private matters. I'm sorry for the pain of his family. They will certainly be determining the strength of their bonds and their capacity for understanding and forgiveness. I hope that they are allowed to do that, if they can, in privacy.

Nevertheless, it is disappointing to be reminded that our public officials are human. Worse to be reminded that because they share our DNA and accordingly our proclivities to the baser side of our humanness. Perhaps that why we expect more from out government than we can muster ourselves. There's a lesson there, I'm sure. I'm not excusing it. But the older I get, the less surprised I am by anything.

I've got cherry & grape tomatoes coming out of my ears. The plants that my husband planted are like nothing I've ever seen. I got the idea on another blog (Real Money) about drying the tomatoes (someone had mentioned buying sundried tomatoes and another would not think of purchasing them but making them). It never occurred to me that you could make them. So this morning I picked a bunch and sliced them in half. I put them on a cookie rack over a baking sheet. I put them on 175 in the convection oven. They are now the size of dried cranberries (10 hours later). Oh my are they good! It was easy too. Hopefully I did not use $50 of electricity for the small bounty of dehydrated jewels.

We've many cross currents in the market. I've had a thesis about some of this which I've shared here. First, I believed that there was no way that decoupling was anything but a myth. There's just no way that the world's largest economy could not effect the rest of the world when it slowed down. Second, I believed that the oil was being driven not from fundamental forces, but rather from speculative forces. But as commodities are the last to top in a business cycle, it was not unusual to see it goosed (as I've learned during this market cycle). Third, I believed that despite how bad things are (and I think that they are as bad as I'll see in my lifetime), on a relative basis our market may appear stronger because
  • stable government
  • strong central bank
  • transparent markets
  • our currency being the reserve currency (we are too bid to fail)

(Yes I realize that each of these items have some indictments against them). Money ultimately has to seek yield/return---witness why CDO's and their derivative cousins were so popular! With global money having to not only find return but avoid currency deflation, I surmised that if our USD were to get stronger, then in combination with the points above, we would have a decent chance of seeing our markets appear more attractive to foreign money.

I'm seeing lots of warnings on the commodity stocks from different respected venues. I saw a video on Bloomberg with Marc Faber (you can access it here). He makes a distinction that while he is long the USD he is not long US stocks.

There is much euphoria over the drop in oil. I think that the consumer is still underwater, but it makes sense that we'd see some knee jerk reaction in the heavily shorted areas. We've seen these areas rally hugely before. While I don't see the oil as being a tailwind for the consumer, I think it ceases to be a headwind.

I was listening to Gary K's show. He says:

  • still in a confirmed rally.
  • stay out of commodities
  • watch oil

He's watching an probing. He mentions these stocks:

FSYS (don't buy, though--just look at it)
CEC (gapped up and sitting around for 2 weeks, watch list)
IBM (watch, unusual that it was down while market was up)
NSC (better on the pullbacks rather than ramps)

I'm off to transport dogs. We've some glorious weather (meaning cooler and less humidity). Enjoy your weekend.

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