We’ve been long cash now for a good solid month and a half at this point, and for those following our calls you received a 9% return this summer plus the rising value of your cash, as the US Dollar index is up some 5% or so since we jumped out of our shorts (way too early mind you) and even though we stayed short and told others to stay short, for the mode we went to cash because we wanted to lock in some gains from our profitable 7/7/2011 short signal. At this point I am considering issuing another short call but because I need technical as well as fundamental confirmation, I am currently fine with greenbacks (which coincidentally are up $.54 right now to $77.60 or so)… The Euro is in big trouble and a weak Euro will hurt our exports and also our earnings in emerging and mature markets overseas. Inevitably, the overall market is tied to the strength of the banking sector and right now that sector doesn’t look very strong.
Hedgephone has a bunch of fundamental articles coming out through SA tomorrow, so stay tuned for some better drill down on stocks. Remember, for now cash (and gold, Sterling, Franc, Thai Bhat, Rupee, Kronor, Aussie Dollar, Silver, and fancy diamonds) is still king.
Are we are heading toward some type of hyper inflationary event? If the charts of gold and silver tell us anything the answer is yes. The fact of the matter is that America is backed by a FIAT currency which is backed by too much debt. From an Enterprise Value to EBITDA perspective, our nation looks like a terrible credit, let alone a risky equity investment. The days of the US Dollar are numbered, as all FIAT currencies have become worthless throughout history. Rome debased their money away from gold and silver for centuries until eventually their money became literally worthless.
The same hyper inflationary depression outcome happened in Kublai Kahn’s day when he left gold and silver backed money and printed cash to pay for wars in foreign lands. In my view, passing the debt ceiling hike is just another step towards the bitter end for the US currency. We need a gold and silver standard and to put a stop to the big bank and military industrial complex ‘s domination of our nation’s politics. In my view, the debt ceiling should not be raised, and this should serve as a wake up call that moves us back to a real Republic in which gold and silver back our currency. Kublai Kahn’s currency became worth nothing, just like our Dollar is rapidly becoming with our huge debts and the money printing we have used to pay for our wars and bills just as the USSR, ROME, and Kublai Kahn did among other FIAT currency nations throughout history. Without sound money, we are surely heading for a similar outcome, yet no one on FOX news or MSNBC will tell you this historical truth.
Here is an excerpt from the Coleridge poem “Kubla Kahn:”
- And all who heard should see them there,
- And all should cry, Beware! Beware!
- His flashing eyes, his floating hair!
- Weave a circle round him thrice,
- And close your eyes with holy dread,
- For he on honey-dew hath fed,
- And drunk the milk of Paradise
The USD has traditionally traded inverse to US stocks. After today’s large move higher, we have decidedly broken out of the downtrend written about in last night’s chart study… It is time to be very cautious in equities regardless of 2nd quarter earnings…
Staying short equities with tight stop loss order seems to be a viable and optimal strategy to me… Investors want to focus in on the USD using www.barchart.com to see where the currency market is heading before looking at the stock market….
What is clear to me is that the problems in Europe are worse than we imagined and that this will lead to lower earnings for US multinational stocks… Undervalued companies which are domestic focused should do well even in a bear market for the Euro and for US equities…
Hedgephone’s short signal is now up nearly 3% on the SPY, QQQ, and IWM… We are bearish here, but would set a buy to cover stop order at around .6% higher than we are currently, that way you have locked in a profit….
Always trade with stops on the short side and also try to buy undervalued equities for your long book… following the currency market for equities appears to be the best way to “trade” the market at present.