…this is the night we ride
This ain’t the Garden of Eden, there ain’t no angels above, and things ain’t like they used to be…
Well, for a day at least they ride.
The US dollar is finally doing what I’d expected and putting on a counter-trend bounce. I’ve been nursing and increasing my second largest position (a leveraged Euro short, w/ cash being #1) for weeks now and it’s finally acting as I’d have liked on a dark day for the markets. However, note the term “counter-trend”. That’s what this is, a bounce in line with a much needed running of the macro bulls.
As was expected if USD began gaining a liquidity bid amid a market rush to said liquidity, Uncle Buck’s fellow rider is on its horse as well.
But as with the devalued currency above, it is on a counter-trend bounce as well, as fiscal (Trumpies) and monetary (Fed) authorities seek to put the US of A into full frontal Banana mode. So this deflationary whiff, this knee jerk to liquidity by man, machine and casino patron alike is within the context of a coming Banana Republic that Trump is creating (I may post an article at some point about his disastrous effects on the Semiconductor industry and other leading edges while promising to bring back factory jobs that will not be coming back due to automation and robotics).
Back on topic, the bottom line is that we have been planning for an interruption in the market’s bullish momo and wanton greed on display for much of the summer (I am short several areas and long volatility to hedge, along with the Euro short and cash noted above). But as it stands now, that interruption is counter-trend and the correction healthy by definition of how desperately necessary it was to an over-bullish, over-pumped atmosphere.
A pullback in inflation expectations would be consistent with that as well. But remember that it is under the cover of such environments that these pigs INFLATE. So the world is not necessarily ending. It’s just no longer the Summer of Love (and greed).
Finally, the market is interesting again as it begins to lever up future opportunities.
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