Last week we saw multi-week highs in equity and commodity markets and lows in the USD Index. However, we did not see new highs in fixed income or real estate markets. Perhaps this states the rather obvious but it highlights the fact that there is little credible challenge to the bullish phase in equities, commodities, fixed income (namely corporate bonds), and real estate markets and the down trend in the USD Index. To us actions speak louder than words and we believe things when we see them. Yes it is rather simplistic but this philosophy has served us well over the years and is perhaps what give us the “edge”. In essence we try to capitalize on the short coming of group thinking of others. We have been somewhat intrigued at how the “perma-bears” (like Roubini & co) still command a wide ranging following every time they express their opinion, even though they have been insanely wrong over the course of the last 11-12 months. Of course the perma-bears may still ultimately prove to be right (we have no idea as to how things will pan out in the future) but whilst the media continue to wheel out them out at the drop of a hat we continue to believe that markets will defy even the most “rational” sounding bears.
A number of commentators are expressing concern at how oversold the USD Index is. To be honest we do not see the USD Index as being in an extreme oversold condition or displaying any behaviour that would suggest an exhaustion of selling pressure. Until such time we continue to believe that there is more downside in the USD and we are likely to see a continuation of the trends that have developed as a result.
