Good afternoon. I hope I find you well and refreshed from a relaxing, long weekend.
At the moment, I’m sitting politely eating a piece of banana bread, spread liberally with cream cheese, while plugging away at a few light problems in the office.
I did not look at the markets at all this weekend, save for a brief jaunt on Twitter, where I caught up on only a modest amount of news. In fact, I completely swore off work, for the last few days. I needed to; my condition is now the extreme opposite of what it was in the winter of 2010. Rather than working for recreation in a leisurely life, I am now relaxing for recreation in a busy life. Which is how things ought to be.
Now, for the markets, I am torn of two minds. The first looks at the state of affairs and thinks “I should press my bets.” I have not yet fully recovered from last year, and I like my chances. Global economies suck, even after such immense interventions as we’ve witnessed, and I truly believe that further easing and money printing will catch the world with its pants down.
Money printing will cause further contraction. Look at Europe; they need it just to uphold what little productivity they have. ECB intervention can at best hope to hold things to the current trajectory, which is down.
Many economies that all need to export to one another at the same time are destined for hardship.
However, the other mind that I am of suggests maybe things are set for a very sharp rally. The number of euro shorts have increased by double digit percentages week over week for several weeks now. This size of a crowd is probably littered with the unwashed masses; the kind of men and women it’s better to just not have on your team at all because they can only invite pain and suffering onto themselves and those around them.
So my guess is we get a big rally shortly. It will be followed by more downside – at least until the middle of June, when “Fed Day” starts to grace the headlines.