Who Says The Crowd Can’t Sometimes Be Right?

I don’t believe it was even five minutes after suggesting that the number of euro shorts could be tinder for a dollar dropping, risk-on rally that the euro collapsed under its own weight, like a sprinter with a broken ankle.

But maybe that’s a warning unto itself. The only reason to be betting on this market so far is the old adage of the madness of crowds. Contrarianism runs strong in markets, and why shouldn’t it? The unwanted bet is the cheap bet. And the cheap bet frequently carries the best odds.

But there is no law that the majority cannot be in the right.

Sometimes, it doesn’t matter that everyone knows something to be true; not when that truth is something terrible enough.

Who says these massive euro short positions have to be scaled back before the euro can drop more? We don’t know who’s short the euro. For all we know, these shorts are hedges by European companies, and are now a standard part of doing business. They may not be going anywhere.

As far as I’m concerned, the euro going to par against the dollar is a forgone conclusion. It is a matter of when, not if. I would not be surprised if the euro shorts get set on fire between then and now, leading to “risk on”. But I’m not going to bet on it either.

Instead, after watching this afternoon’s action, I’m going to wait patiently for my targets to get hit, so that I can scale out of ERY, SCO, and TVIX – for profits.