Monthly Archives: November 2009

IMF Signals Support for US Dollar

As you all know, our model is calling for a USD melt-up coincident with a stock market crash and we believe that has finally started.  We also believe the quant-driven “one-trade” dynamic of dollar DOWN/stocks, crude, gold, etc. UP will be looked upon (blamed) as a “catalyst” once the market crashes.

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Here’s an interesting article released yesterday.  It didn’t gain a lot of attention but that’s pretty typical when sentiment moves to an extreme.  (USD bearish sentiment readings are at record levels)

Our model is extremely bullish the US Dollar and we remain long.

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IMF/DOLLAR (URGENT)

WASHINGTON, Nov 19 (Reuters) – The U.S. dollar will remain the world’s primary reserve currency for many years or decades, an International Monetary Fund official said on Thursday.

Spokeswoman Caroline Atkinson’s comments came two days after IMF Managing Director Dominique Strauss-Kahn said the world can no longer rely on a currency issued by a single country, and a new global currency may evolve out of the IMF’s in-house unit of account, known as Special Drawing Rights. (For more, see [ID:nPEK204168])

“The managing director has said … he expects the dollar to be the leading reserve currency for many years or decades,” Atkinson said at an IMF media briefing.

She said the IMF routinely looks at what is happening in the international monetary system, but was not launching any sort of formal study into how SDRs might one day replace the dollar as a global reserve currency.

“During this last financial crisis, people actually found the dollar a safe haven and preferred to move into dollar assets when risk aversion was very high,” she said. “That suggests there’s very solid demand, based on the U.S. economy’s strength and size and liquidity of its financial markets.”

The dollar’s role in the world economy has been a topic of debate in recent months as its value fell against a basket of currencies. China, the largest foreign buyer of U.S. government debt, has expressed growing concern that the weakening dollar would hurt its finances. (Reporting by Emily Kaiser, Editing by Chizu Nomiyama)

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Let’s Stop the Lip Service and Start ‘Supporting’ Our Troops

For over one year now I’ve been telling anyone willing to listen that the US bailout will be viewed by historians as a complete and utter SCAM unless we’re willing to help our military by making them part of the solution.

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These men and women risk life and limb for next to nothing while Wall Street feeds at the trough.

We need to stop the lip-service and show our commitment to these returning heros by including them in the American dream.

Hell, we could GIVE each and every one of them a FREE home for less than the tax payer subsidized bonuses we’re going to be paying Wall Street in December and January alone!

A friend of mine sent this piece to me written by Dylan Ratigan, and it echos my sentiments exactly.

Please take a moment to read it and see if it makes as much sense to you as it does to me.

Sincerely,

JG Savoldi

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The following piece was written by Dylan Ratigan

One thing about doing a two hour show that heavily covers both the financial crisis and the wars in Iraq and Afghanistan is that you notice on a daily basis the shocking juxtaposition between the lucky Wall Streeters and the unlucky soldiers.

We all know at this point that our banking system is being used as an unregulated bonus-seeking mechanism for bankers, now underwritten by taxpayers with $23.7 trillion worth of national wealth.

Bankers lent pretend money to home buyers to award themselves actual money in bonuses — making home prices balloon and, in the process, bankrupting America’s treasury, currency, the states, and many of its citizens.

To simply let the housing market rapidly correct itself (or more likely over-correct) would result in massive societal disruption, possible violence and unnecessary suffering.

So while we slowly attempt to close the taxpayer-funded bank casinos and try to restore the basic rules of investment and lending in our economy, we have difficult decisions to make.

Unfortunately, our only choice for a less jarring social transition so far has been to artificially adjust the real prices of our homes via government guarantees to banks (for bad mortgages and losing gambling bets) — or relatively arbitrary handouts to home buyers.

What did these people do to deserve the handout?

How do you feel about a Wall Street Banker who has been renting an apartment here in New York and this year combined the bonus money he made on bundling new taxpayer-sponsored Fannie Mae CDS with a first-time home buyers tax credit gift from the taxpayers to buy the penthouse in his building?

Meanwhile, we have already been at war for 8 years with no end in sight. World War II was 5 years. We are fighting these wars with the fewest number of soldiers in modern U.S. History. To avoid incorporating a politically unpopular draft, we deploy the same soldiers five or six times with comparatively minuscule breaks in between.

However, the dire state of the economy has been a boon to military recruitment, but I am not sure if we will ever see the Wall Street bank scammers claim their rightful credit for that.

So instead of using these bad- (Wall Street) to- arbitrary (first time home buyers) ways to pump money into rescuing our housing market, let’s give it to those who are truly deserving of handouts: our servicemen and women.

I propose that we immediately enact the following:

  • Give every single man and woman that is fighting for us a housing credit of $50,000, with the caveat that the credit must be used by someone within two years.
  • Make it so that the credits are completely fungible, meaning that if the veteran doesn’t wish to buy a house, he or she can sell the credit to someone who does — and keep the money. If the reselling of gift cards on Ebay is any indication, I am sure there will be a thriving market where soldiers could probably get pretty close to 90 cents on the dollar for their credit.

Considering the roughly 2 million veterans who have served in Iraq and Afghanistan so far, this would give a much needed $100 billion boost to the housing market. Just as a template for comparison, Goldman Sachs (albeit it doing “God’s work”) and the other complicit banks like JP Morgan and Morgan Stanley will pay $29.4 billion in personal bonuses this year.

In reporting on this financial crisis, I have been most surprised by the blatant disregard that our politicians and even some journalists have shown for the most fundamental American notion of fairness. I don’t think handing taxpayer trillions to some of the least worthy individuals is something that our country will stand for, regardless of what the current incumbents think.

If we must resort to handouts to save our country, let’s at least put them in the hands of the most deserving.

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The “Unpredictable” Nature of Mother Nature

Once again, the BAM Model has rewarded us for having the courage to follow a fundamentally ‘baseless’ trading idea.

What I’m referring to is the wheat market and our purchase of wheat during the recent Twitter Campaign.

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The model’s September prediction of a “melt-up” in the wheat market was followed by what analysts in a Bloomberg article today called “the biggest October rally in at least 50 years.”

However, for investors bold enough to follow the BAM Model’s prediction (buying into a multi-year low) the move had a more direct impact–one they saw reflected in their accounts.  Case in point is the tweet we received from a Twitter follower on October 21st saying “@Baminvestor per your suggestion, lightened up on Dec wheat today, sold a few contracts for a 950% profit, looking for the dip to re-enter.”

We’re glad the position worked out so well (we still own it ourselves) but our interest in bringing this post to you all is in simply pointing out the unpredictable nature of Mother Nature.

It turns out that the “experts” (the guys bearish wheat prices) were caught off guard when “recent weather patterns delayed planting.”  It was that quote–blaming the largest rally in 50 years on weather–that prompted this posting.

You see, one of the calls that first grabbed the eye of the hedge fund I eventually went to work for was a prediction in the OJ market back in 2004.

It was May of 2004 to be exact and Orange Juice had been in a brutal 13 year bear market from 1991 to 2004.   Adding to the brutality–as well as the certainty–of the decline was the fact that the nation was caught in the grips of a diet mania known as the “Atkins Diet.”  Some of you may recall that “low-carb” fad and, as we all know, orange juice is about as high in carbs as any drink out there.  Anyway, long story short, people did as they always tend to do, they moved heavily into an investment position at exactly the wrong time–shorting orange juice aggressively right into May of 2004.

The BAM Model on the other hand, was screaming bullish and alerting us to an immediate upside price reversal that would–if the market tracked the model–lead to an EPIC melt-up.

All of my friends thought I was crazy and they ignored the model’s call, choosing instead to follow the adage “the trend is your friend.”

Guess what happened next?

Four devastatingly strong hurricanes ripped directly through the orange groves of Florida.  In fact, Polk county–ranked first in citrus production–was the only county in the state to feel the eyewall of three of the four major hurricanes–Charley, Frances, and Jeanne.

What followed next was a 220% move in OJ that not only caught the eye of that hedge fund I referred to, but proved to me without a doubt that cycles in human behavior tend to peak opposite the cycles of mother nature.

It also taught me to never question the predictive nature of the BAM Model–no matter how seemingly outrageous those predictions might seem.

Click HERE for the full Bloomberg article.

JG Savoldi

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