Mon, Sep 29 2008, 15:37 GMT
by Jack Crooks
We should have known. It seems to happen each time we are near some type of extreme in sentiment—we receive very strident email telling us we are wrong.
Lately we have received more and more mail telling us we are absolutely certifiable (and some weren’t near that nice) in believing the dollar will be supported, let alone rally, in this environment. “It just can’t be, goes the lament.” Well, ladies and gentlemen—it can be. And is!
It all comes back to Frederic Bastiat, and his cogent analysis of importance of the things that are not seen in world of economics. Here is the exact quote [our emphasis]:
Bastiat, That Which is Seen, and That Which is Not Seen, 1850
Does this mean one has to foresee the future to be a good economist or make money in markets? No. It means one must be open to the unseen series that might cause price action to be very different from the consensus. And develop alternative (plausible) scenarios to increase the probability of making money from these unseen actions beneath the surface of the economy.
Our broader underlying theme of dollar bullishness hasn’t changed—our scenario is simple: Deleveraging means money moves to the center (US capital markets). And there is unseen dollar support by big players out there, as it is in no one’s interest for the world’s money i.e. the world reserve currency, to be trashed when confidence in the system is paramount to achieving stability and staving off global depression.
Does price action today mean we are right? Absolutely not! It may be pure luck—which we’ll take over being right any day of the week. But, for now, we stick to the story.
How long can this last? We don’t know. But maybe a lot longer than now believed. And if so, our secondary scenario of the US emerging from this morass before the other key players (primarily in Europe) might represent the longer term fundamental driver for the buck. I know what you’re thinking—you guys are nuts! Well, maybe. Time will tell. It always does.
Regards,
Black Swan Capital
Published on Mon, Sep 29 2008, 15:59 GMT
Black Swan Capital LLC
| 2161 SW Racquet Club Drive Palm City, Florida 34990
http://www.blackswantrading.com | jcrooks@blackswantrading.com
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