Equities and the U.S. Dollar Index
By Eric 11/13/09

There’s a lot of media coverage of pending stock market crash or correction.  Those supporting this view are suggesting selling or shorting into strength.  The following is intended to add to that discussion:

• Stocks have increasingly moved inversely relative to the U.S. dollar since 2000.  Up dollar, down stocks.  Down dollar, up stocks.
• COT money flows suggests that most bearish phase of the dollar’s primary downleg is about to begin.
• A technical review of the Up/Down As % of Total Volume Indicator, a measure of stock market breadth, and comparison with the previous corrective phase between May-July 09, suggests a new up trend is about to begin.

Click charts to enlarge in PDF format

Jim Sinclair’s Commentary

CIGA Richard B. takes a nice look back at yesterday.

Dear Jim,

On Thursday, 11/12/09, in Singapore, Secretary Geithner served up a type of MOPE that might best be described as "Say Anything." It was reported in the last two paragraphs of a Reuters piece by Glenn Somerville titled, Geithner Stresses Strong Dollar’s Global Role. The full article can be seen here…

The article primarily reported on Geithner’s statements yesterday that it’s very important to the United States to have a strong dollar, and that the U.S. carries a special burden for protecting the currency’s value because it is the global reserve currency. This has been his mantra over the course of his travels through Asia this week.

However, the jaw-dropper at the end of the article read:

"In a later interview on CNBC television, Geithner said the Obama administration needs to borrow ‘substantially less than we initially anticipated’ to bail out the financial system and said that will help get the country’s fiscal house into order.

‘That’s going to allow us to devote more to debt reduction,’ he said without offering any estimate how much less will have to be borrowed. ‘That’s a fundamentally good thing’."

Meanwhile, back in the States, the relevant economic headlines were,

-Fannie, Freddie Warn on More Losses;
-FDIC Orders Banks to Prepay $45 Billion to Rebuild Deposit Fund;
-Federal Housing Administration’s Reserve Fund Drops Below 2% Ratio Required By Congress;
-FHA’s Reserve Ratio Dives to 0.53% After "Significant" Loss;
-U.S. Foreclosure Filings Surpass 300,000 for 8th Straight Month;
-22 Percent of Florida Mortgages Non-Current;
-AIG May Tap Credit Line as Commercial Paper Expires; and
-Ambac May File Bankruptcy Soon.

Just to top things off, reports early Thursday morning read, Federal Deficit Expected to Hit $150 Billion in October, 1st Month in New Budget Year. However, by mid-day the headline became, Federal Deficit Sets October Record of 176.4 Billion.

Hopefully this $26.4 billion increase in the deficit over the course of the day yesterday did not wipe out Secretary Geithner’s projected savings from the lower-than-anticipated cost to bail out the financial system.

Respectfully yours,
CIGA Richard B.

Jim,

The following headline speaks volumes. You might not be able to sell a Maple Leaf on the street for $50, but that does not mean that everyone is clueless.

CIGA Eric

Super-rich buy gold and sell hedge funds
By Steve Lodge
Published: November 13 2009 10:42 | Last updated: November 13 2009 10:42

The investment preferences of the world’s wealthiest families have shifted significantly in favour of gold and other commodities and away from hedge funds in the wake of the financial crisis, according to a survey of family offices and advisers of the super-rich.

Two-thirds of the 100 respondents to a survey by the Family Office Channel, a new website, said that super-rich families are now more likely to invest in gold and other commodities. They are also more interested in bond investments and in holding higher amounts of cash as part of an “instinctive retreat to ultra-safe asset classes”.

By contrast, two-thirds of respondents said the wealthiest families are less likely to invest in hedge funds and structured products – investments offering capital protection – with one in three reporting “greatly reduced” interest in these holdings.

More…

Jim

The rumor about tungsten filled bars manufactured by the US has been floating around for a while. The timeline certainly makes sense. All I know is a huge scandal is coming. There is way too much demand for the limited supply of gold at current market prices.

CIGA Eric

http://www.financialsense.com/fsu/editorials/kirby/2009/1112.html

http://www.kirbyanalytics.com/

Jim,

Senior UBS AG executive Mark Branson will head Swiss regulator FINMA’s banking unit, the Swiss watchdog, by early next year. This creates a huge conflicts of interest caused by ties between the regulatory body and the banking industry.

The Swiss government had to bail out UBS in October last year as the bank ran up over $50 billion in write downs and posted the largest corporate loss in the country’s history.

I don´t recognize Switzerland anymore…

Best regards,
CIGA Christopher

UBS exec Branson joins Swiss bank watchdog FINMA
By Sven Egenter
27 October 2009 @ 08:44 am ET
By Sven Egenter

ZURICH, Oct 27 (Reuters) – Senior UBS AG (UBSN.VX)(UBS.N) executive Mark Branson will head Swiss regulator FINMA’s banking unit, the Swiss watchdog said on Tuesday, in a move likely to reignite debate over close ties between regulators and large banks.

The 40-year old Briton took over the role of chief financial officer at the troubled Swiss bank’s wealth management unit in February 2008 and FINMA said he would start in his new position and join its executive board on Jan. 1, 2010.

He will not take decisions affecting UBS for a year, during which time decisions on his former employer will be taken by FINMA Chief Executive Patrick Raaflaub.

Branson moved into the spotlight earlier this year when he testified and apologised for the bank’s breaches of U.S. law in a Senate hearing during a bitter tax row with U.S. authorities.

More…

Dear Christopher,

The champions of the Swiss Banking Industry are turning over in their graves at 9000 RPM.

What you are observing is a worldwide phenomena as finance takes over government, except in China.

This is why the Fed will not go against Wall Street.

UBS used to be one of the most conservative stars in world Banking industry.

Regards,
Jim