Tuesday, September 16, 2008

Deflation Everywhere You Turn, Get Comfortable

My morning glance at the Futures screens revealed that, well, just about everything is down across the board. Of special note:
  • Cotton flirting with the 60-cent handle (wow, that looks cheap)
  • Silver getting kicked in the teeth again
  • Oil off big again, flirting with $90
Not to mention global stock markets getting slammed across the board.

In fact the lone positions weathering this storm appear to be our old friend, the Japanese Yen, and US Treasuries - both due to this flight to "safety".

Maybe "perceived safety" in the case of Treasuries - is it really safe to lock in a long-term yield that is below the rate of inflation, to a heavy debtor with an awful balance sheet?

I'm playing this mostly from the sidelines. I've got my long Japanese Yen position, which is performing nicely. While adding another contract may be the trade to make, I'd like to see how the rest of the week goes at the very least. I don't like buying the Yen, and the Swiss Franc for that matter, on these spikes, as I've seen them give back these gains before.

Also have my short Soybeans contract - which looks like it wants to bust through that lower level of resistance.

All in all, we may need to hold tight on the commodity front until the global economy gets through this soft spot. My suggestion would be to get comfortable. When the global economy reheats, we will have some fantastic buying opportunities.


Moyo said...

The dollar rallied today, but i believe that if this rally is over, which is soon, that will be a signal for the continuation of the commodities bull market.
AIG is in some trouble, and there's rumor that the govt may bail them out. If that happens, that should kill the dollar.

SugarHigh said...

I agree with you - I think they will have to bail out AIG, their books are much more interconnected than Lehman's.

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