The Dollar, The Market, Oil

Okay, so the dollar's meteoric rise of late has begun to collapse. What did everybody expect? I don't think many people who know what is really going on honestly thought that the dollar would do anything but slide in value compared to other currencies when the Fed decided on this zero interest yield on treasuries plan.

It's quite surprising that Oil has continued to fall for the last couple of days. That's not what I would have expected. In fact, I would still expect oil to rise for two reasons. First, OPEC sharply cut production recently. Second, since the dollar is the currency used to buy oil on the exchanges, when the dollar slides in value, the price of oil rises.

The fact that oil has not risen with the slide of the dollar, and OPEC production cuts means that investors anticipate a recession/depression that will be so severe that the demand for oil will continue to fall down down down, similar to what happened in the 1980's. Given the strong upward pressure on oil from the dollar, and OPEC, the fact that oil is still falling says that investors expect this recession to be BAD. I feel the same way, 2009 is shaping up to be a bad year.

I'm staying out of oil stocks for now. There are a lot of unusual things going on in the market and I can't keep track of everything, and even though I still expect oil to rise, I just don't know.

I've still got my long term put options on Goldman Sachs. So far the Bernake/Paulsen insanity has propped up that institution. And I still think that before June they will get battered some more, so I'm holding on to that position.

I have several long term put contracts of RKH, the ETF for the retail sector. After the holidays and everyone announces earnings I anticipate that the retail sector will slide again pretty hard.

The market is kind of grinding higher. I think it will do that while Bernake/Paulsen work really hard to calm everyone down and spend taxpayer money to magically convince everyone that everything is going to be okay.

But sometime in the next 3-5 months, things will tank again, bringing the Dow down to around $5000. Until that starts happening, I'm just going to take it easy in cash. Actively trading the insanely volatile up/down market of the last couple of months is something I'm just not very good at.