Monday, April 25, 2011
Europe Closed
With Europe on holiday, overnight trading was quiet and I don't expect much today. All the action is over in the commodities, with silver futures trading more volume than gold futures, which is very rare. It looks bubbly, but I think silver will go much higher. So much for Goldman Sach's call of a top in commodities, that was pretty much the bottom. Oil is back to new highs and everything is back to usual. I don't believe that the Fed is responsible for this boom in oil and other commodities. It's real demand. The fake demand is in stocks and bonds, because they are being directly manipulated.
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Oil is as much manipulated effectively as anything else that is priced in USD, if you look at oil in say Yen, Francs, Aussie dollars (so a range of interest rates from zero to high) much of the gains in many commods is simply a function of dollar weakness which the Fed and Tiny Tim at the Treasury have certainly helped. I think dollar will be bouncing from here for a couple months and the sell dollars and buy anything (ex China , India and a few other EM"s with inflation issues) will see a meaningful correction.
To a certain extent, dollar weakness can explain oil strength but oil is up a lot more than the dollar index is down. Same goes for corn, gold, silver, cotton, etc. Dollar weakness is just a small part of it. The fundamentals are great in commodities.
I guess you can catch a counter trend bounce in the dollar but it looks to be in even worse shape than when it was getting beaten down in 2007. I wouldn't want to be caught being long the dollar as long as Banana Ben is Fed chief.
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