If you are scratching your head, wondering why the market is weak, take a look at the yen versus dollar, via FXY.
With the yen carry trade unraveling before our eyes, liquidity is getting tighter. This all comes at a time when U.S. banks are crippled, thanks to sub-prime issues and the Fed, foolishly, worrying about inflation, instead of blood in the streets.
I know some of you dumb fuckers believe they (Fed) should stop cutting rates, in order to defend the dollar. However, I’m telling you now, if they fail to “rescue” the banking system, there will be dozens of publicly traded banks filing for bankruptcy.
Basically, the Fed needs to figure out a way to save the economy. Let the Treasury figure the dollar out. How about a dollar buyback?
So, in the meantime, financials, retail, and homebuilders are in recession, while everything else teeters.
Regarding the market:
We will retest the August lows. I’m not buying anything until 12,800.Comments »