Dear CIGAs,

Trying to get a read on these markets is like trying to measure the distance from East to West. You can never quite get there because your starting and ending points are always in flux.

Yesterday was “WE LOVE RISK” day. Today was “WE HATE RISK” day. About noon it seemed to become “WE HATE LIFE” day “Because we have no idea whether we should love or hate risk”. That was about the time that the Euro came off its worst levels of the session with crude oil moving over $1.00 off its lows and soybeans and corn moving well off their lows. Gold then moved off its worst levels of the session.

The only thing which seemed to be stuck in la-la land was the bond market which promptly proceeded to erase every single bit of yesterday’s losses after having erased every single bit of the previous day’s gains. Bonds are worse than schizophrenic right now. They are hopelessly broken as no one knows what the hell to do in that market. Players are fearful that convexity plays are going to emerge if they move a bit higher from here and that will bring in even more buying as mortgage outfits look to hedge against potential waves of re-financing as interest rates drop. The FED would no doubt love that and is probably helping to push things along since they are scared out of their mindless wits about a market driven rise in the long end of the curve.

I gotta hand it to the ol’ pork belly market however – it is happy as a lark and is limit up for the second day in the row. The guys in the belly pit ( all six of them that are left) could care less about what the frenetic action in the bond market is – they are hungry for some BLT sandwiches and do not care whether Dick or Jane are going to refinance.

The move up in gold corresponded once again with the move down in the Dollar and the move up off the lows in crude. That is pretty much going to be the tune until something emerges to change things in a bigger way. Everything will depend on whether or not the market wants risk or wants to avoid risk. Personally I think it is beyond stupid that gold would be considered a “risky” asset (especially compared to worthless scraps of paper IOU’s called Treasuries) but it is what it is until the algorithms say otherwise.

The move up in Comex gold yanked the HUI and the XAU off of the cellar and pushed both of them into positive territory as I write this. Whether that will last through the closing bell is anyone’s guess at this point.

There is not a whole lot to say about the price action of the day other than the fact that once again we are witnessing markets that are being tossed around by hedge fund activity tied to movement in the Dollar and in the equity markets. Perhaps the only good thing that might come out of this is that these monstrosities will rip and shred each other to pieces in the process of their trading activities happily making them all disappear with their managers going to work doing “shovel ready projects” for the government as part of their penance for destroying our markets. They are a plague of locusts that are devouring everything in sight.

The Dollar continues to bounce from the lower end of its trading range as every time it threatens to break down below support, it pops up and rebounds. It is hard to say whether the authorities are playing games in the Forex markets but it is difficult to believe that they are not especially when one considers that with the passing of each day, the news coming out about the Dollar just seems to worsen as more and more the Chinese are voicing their disgust with US economic and fiscal policies. They are being joined by India, Brazil and Russia and none of this bodes well for the fortunes of the greenback over the long haul.

My take on this is that while the hedge fund algorithms are ruling the markets for the immediate now, the actions by these other sovereign nations is what is going to ultimately put an end to this trading volatility and begin a long term trend in the Dollar as it fades from its lone position of supremacy atop the pack of global currencies. Esau squandered his birthright for a bowl of stew – what have our monetary and political leaders gained for squandering the inherent stability in the Dollar that has served our nation so well for so long???