Eleven Two Fund Management
Well, certainly the start of 2010 has looked a whole lot like the end of 2008. Since Thanksgiving the U.S. dollar has been in a strong uptrend that looks set to continue as the European currency is in a very dangerous situation. I was recently reading an article by investing expert Clive Maund and here is what he said in his article. “If you have any memory of the events of 2008 you should be familiar with the script, but just so you are absolutely clear, here’s what happens, in a nutshell: commodities and stocks crashed as hot money flees to the safety of cash in short-term bonds. This is a self feeding process which will be made worse this time around by the rising dollar, because the run up in commodities and stocks over the past year was fueled by a massive dollar carry trade, of much greater magnitude than that proceeding the 2008 crash, as speculators have feasted on 0 U.S. interest rates. Now that the dollar is firmly in an uptrend the speculative positions must be unwound which will drive the dollar higher and higher, particularly as the European Union is a state of deepening crisis that could crash the euro.”
For those of you that follow the U.S. dollar index you already know that the U.S. dollar index essentially is made up of about 63% or more of the euro. So when we talk about the euro crashing we’re also talking about the U.S. dollar skyrocketing. It means the same thing because the euro makes up such a large percentage of the U.S. dollar index. In other words, the U.S. dollar index is not an equally weighted index of the U.S. dollar versus the Canadian dollar, Australian dollar, the yen and the euro and some of the other major world currencies.
Another very interesting fact that Mr. Maund pointed out is that cooper has already begun to crash this year in 2010 and here is what Mr. Maund wrote about the broad U.S. stock market. “The broad U.S. stock market appears to be shaping up for a crash.” I follow probably 20 different sectors and of all the sectors I’m following I’m bearish on all of the sectors currently other than biotech and healthcare. I moved most all of my client’s money out of U.S. stocks in late January and very early February with exception of real estate stocks. We are still holding some real estate stocks.”
Here is another interesting quote from this article written by Clive Maund about the U.S. dollar and here’s what he wrote. “With the flight to safety in full swing the U.S. dollar is the place to be. The dollar is in a well established strong uptrend, and higher interest rates may well be on the horizon. An important factor providing a major tailwind for the dollar will be a possible euro collapse as the world’s biggest talking shop, the European Union, verges on chaos and disintegration.”
Another interesting deflationary development that we’ve seen take place here at the beginning of 2010 is that the long bond is up and doing very well which means that interest rates are down and we have also been invested in the long bond here and I moved my clients into the long bond a few weeks or a month or so ago. And then of course on December 22nd I moved my clients into the U.S. dollar index and that has proved to be an outstanding move for us especially in the midst of all these downtrends and decreases that we’re seeing in the inflationary asset. And as a reminder inflationary assets I define as commodities, precious metals, and stocks and real estate.
In summary we will continue to watch the developments in the investment markets as they are unfolding. If we do have a deflationary wave I hope that any of you that are reading this has an exit strategy as I have for my client. I have already used the exist strategy on many of our positions and am well ready and prepared to exit my clients out of real estate stocks and any other inflationary assets that we have if this deflationary wave continues.
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