Thursday, February 5, 2009

Dollar Strength

Surprised by the recent dollar strength? Many have been, but Jim Rogers told us several weeks ago that there would be a time to short the dollar but he didn't think we were there yet. The dollar will stay relatively strong because the Euro will collapse first. I am and have been short the dollar through the UDN. I am considering closing that position because I think the Euro will collapse and that will keep the dollar index higher for a period of time.

As for stocks today--we are in a very pivitol area. The major averages seem destined to break through the November lows. Wal Mart saw positive same store sales and is higher in the premarket. Cisco beat the street last night and was down in the after hours as there comments about the upcoming quarter were apparently dismal. I think we could see DOW 7000 in the next month. Dollar strength will hurt our international companies and that will provide a new panic in the numbers as I do not believe that has been the center of much focus. When you turn on the mainstream media and the conversations are dominated by the Bernie Madoff scandal and the new limit on executive compensation for firms receiving TARP funds---you know that things are getting much worse and much effort is being made to aviod the real issues.

I raised cash yesterday. For the deflationistas-- have you seen the price of a galloon of milk reduced lately? How about the average tab at your favorite restaurant? The drop in gas prices has been a bonus at the pump, but price declines have not worked their way through the system nearly like the price increases did last summer when oil prices were jumping. We are headed for an inflationary depression. I won't argue hyperinflation at this point.

We are hearing protectionist rhetoric on top of this so called stimulus package. Protectionism will cause price increases and will kill our exports. MORE PAIN.

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