Smoking Securities

Half Baked High Finance

6 Months Later

with 2 comments

A tip of the hat to people who can actually blog for more than a month… I certainly couldn’t. Now that we’re plumbing the abyss of financial Armageddon, it seems prudent to comment on these so-called historical times.

Does anyone remember Hank Paulson’s “strong dollar policy”? People (including myself) scoffed at ol’ Hankie every time he uttered those words. I wonder if any of those people still think its funny.

Since late July, the USD has been one of the best performing assets since the massive unwinding began. The “worthless greenback” is proving its value in this crisis, and plenty of the fuckers who stubbornly said it was going to zero are eating their hats as their poorly managed accounts get liquidated.

Via fortune and tact, I’m emerging from the wreckage unscathed. How?

Technical analysis.

Over the last 3 weeks, the major averages NEVER closed above their 5 day moving averages… NEVER. Since early September, the Nasdaq has been falling below a declining 50 & 200 day moving average. These are not conditions for investors as the biggest players are clearly selling.

Those who say this is the product of irrational decision making have never faced a margin call. Finance is a feedback loop, and the system is experiencing an auto catalytic flight to low yield currencies. Selling will beget more selling so long as there are leveraged participants on the wrong side of the trend facing forced redemption and margin calls.

For a weather vane in this storm, watch TBT, ProShares 20 year treasury double inverse ETF. Expect this to rise once people stop shitting themselves and notice the high yields offered by companies with low debt.


Written by chucklesamadeus

October 11, 2008 at 8:51 am

Posted in TBT, USD

2 Responses

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  1. i have no fucking idea what you just said. glad you’re not in the poor house tho.

    ryan muir

    October 11, 2008 at 2:07 pm

  2. Just saw this on facebook and had to comment. Don’t know if you’re doing fx trading or not but I’m expecting the flight from the higher yielding ccys to continue as long as credit conditions remain abysmal (I use the TED spread as my main indicator).

    Also the impact of commodities can’t be understated – if oil continues its plunge I’d keep selling cad and rub in addition the the sell on most latam and emea ccys… usdcad in particular has been showing some really obvious patterns and been performing well on the breakouts this week.


    October 11, 2008 at 3:17 pm

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