All of the quotes below are from actual 2008 and 2009 articles, with examples from each month (which can be reviewed in the archive open to non-members); they establish a consistent and contrarian track record of using a rational macro framework to anticipate key economic and  investment trends in both bull and bear market conditions.  

Calls include the slump in commodities and emerging markets and the dollar rally through Q2/Q3 2008, the equity rallies in March and July 2008 and the dramatic equity crash in October. I forecast in Q1 2009 that the deflation panic was misplaced, and that inflation would be the real issue medium-term despite mediocre recovery prospects, making commodities, resource plays and TIPS very profitable hedges. In late 2009, I turned bullish on the dollar against consensus for 2010, and warned of the downside risks in emerging market equities, high yield debt and commodities as the global liquidity cycle reversed.

11 Dec 2009

The structural flaws at the heart of the European project threaten to be cruelly exposed over the next couple of years and it will take a degree of political generosity and economic wisdom rarely seen on the continent to avoid serious market upheaval. I've been a dollar bull for the last couple of months on a stronger than expected US recovery. I called the dollar right in 2008 against the overwhelming consensus, and I'm pretty confident the crowd will stampede my way again, this time chased by angry Greeks bearing bottles of petrol rather than olive oil.   

20 February 2009

Retaining a cool head while the crowd panics usually proves very profitable. Although the US stock market returned 10-11% per annum over the last century, we had three identifiable 35 year cycles, incorporating 17 years of 18%-20% average annual returns along with 18 years of 2%-4% average returns. The riskiest time to buy equities was a decade ago, when normalized earnings were at their highest since 1929 at nearly 30x, and yet the professional consensus was unrelentingly bullish. We've been in a grinding valuation mean reversion ever since. Even the trough in 2003 was at the highest ever valuation level for a bear market low. While I have preferred TIPS, real assets and investment grade corporate bonds, equities are now at their cheapest versus bonds since 1932, and on a cyclically adjusted basis are trading well below their long-term average multiple. Accumulating a blue chip equity portfolio today, even if the S&P bottoms ultimately at something like 600, should earn high single digit compound returns over the next decade on very conservative economic forecasts.

18 March, 2009

Oil has rallied on OPEC supply restrictions but remains below marginal production costs in the $60-65 area and above cash costs of $30-35, although at these levels many producers would face social upheaval. It seems too early for a break-out from the recent price range, at least until we get clearer evidence of demand picking up in the US and the scale of an accelerating Chinese economic slowdown is evident. Medium-term, of 100 key OPEC production projects announced in early 2008, 35 have been delayed; oil infrastructure spend is down 12-15% in a year, making a spike in prices to $75-100 as global recovery takes hold in 2010 and beyond very likely.

18 December, 2008

The ratio of the S&P earnings yield to investment grade bond spreads is at levels not seen since the 1930's ie bonds are far cheaper than equities as an exposure to economic recovery. Spreads on AA rated credits are already coming in and stand at just under 500bp; I'd expect a move to the 420-450 range in coming months. For risk lovers who enjoy a wild ride on the latest momentum trade, go buy 10 year Treasuries at 2% and expect to lose your hair and your shirt over the next couple of years.

14 August, 2008

We have reached a disturbing moment in financial markets, where the noise to signal ratio across all asset classes is probably at an all time high, the August effect notwithstanding. Never has it been more important to adopt a strategic mindset to investing, rather than stampeding after the latest momentum trade without a shred of conviction. I've been a skeptic on economic decoupling, and had bet the right way on the dramatic reversal in the dollar in The Buck Stops Here?  I'd advised a short on oil and other commodities, where the deteriorating outlook triggered a sudden slump, but I fear that equity markets are still dangerously complacent as to the risk of the brakes slamming on global growth. We will probably reach a tipping point in the next couple of months when the grim outlook for 2009 becomes inescapable and triggers steep earnings downgrades for non-financials and potentially a market panic.

10 September, 2008

Meanwhile, my skeptical view of the Fannie & Freddie bailout has proved correct; the US stock market is technically in very poor shape, and likely to replicate the crash we have seen in emerging markets and commodities, all down 30-50% from their peaks. We see 90% negative volume down days like the 280pt fall Tuesday, but on the rallies like the 290pt rise on Monday the positive volume balance is barely 60%; in other words, only the bear moves show conviction. As I've said many times before, I expect we will see a typical 30% peak to trough bear market before this is over, implying sub 1000 on the S&P and sub 10,000 on the DJIA. I remain defensively positioned, being 100% liquid with puts on key indices 5-10% below current levels.

27 February, 2009

But again. historical perspective is key; based on a long-term 6% EPS growth rate, the S&P has plunged below the valuation range in place since 1950.  The worst case outcome, representing the 14% earnings yield we saw in 1982 and 1974, would bring us back to 550-600 on the S&P, at which point long-term expected returns on equities would be in the mid teens. On current bond valuations, that seems extreme, but generational bear markets tend to overshoot. It is certainly a level at which stocks would generate serious cumulative wealth for an investor over subsequent years.

29 September, 2008

I have consistently argued since August for a strategy of selling equity market rallies, believing that until we see earnings capitulation by equity analysts, whose 2009 forecasts are the stuff of fairy tales, this market will not reach a sustainable bottom. S&P earnings will be something like $70 next year, not the $100 plus consensus. Most of the obvious US and UK bank candidates for meltdown, those with the greatest leverage and a business model over reliant on liquid money markets and buoyant real estate markets, have now been either forced into hasty mergers/firesales (Merrills, HBOS, Wachovia) nationalised (Fannie and Freddie, Northern Rock), or bankrupted (Lehman), which should give some small cause for relief; a very rapid Darwinian winnowing of the weakest has occurred in recent weeks. Unfortunately, the crisis is deepening and widening, both across the financial sector and geographically. These banks were all known risks, as regulated, listed institutions with extensive reporting requirements, but the next leg of the credit crisis will explode in the opaque and unregulated areas of private equity and hedge funds.

28 August , 2008

...likely to precipitate a crisis of confidence at some point this Autumn, as geopolitical risk converges with a darkening economic outlook and the current Bear Rally reverses course. So far, earnings have been saved by the resilience of the global economy (both for industrial exporters and resource plays benefiting from windfall commodity prices), but this is now clearly faltering, and the dollar has dramatically rallied, as I'd forecast repeatedly. And this is the really horrifying bit; for the price multiple on peak earnings to touch the long-term average of 10.4, the S&P would need to fall to 885. Extreme perhaps, but I certainly wouldn't be surprised to see the Dow sub 10,000, and the S&P sub 1000 as all this washes through in a climactic bear market sell off.

30 September, 2008

The credit markets have simply ceased to function meaningfully, and the real economic fallout of that seizure will soon become apparent. Meanwhile, equity market investors, tempted by spurious valuation metrics versus bonds, remain in denial as to the scale of the economic damage from the crash in credit markets and the brutal cyclical downgrades looming in earnings and dividend forecasts (as well as a structurally peaking profit/GDP ratio). As I noted a few weeks ago, consensus views this year on most assets from oil to emerging markets and the dollar have proved wealth destructive, so if investment bank strategists insist on groping for bottoms, let them do it in a nightclub; they've got more chance of success.

21 November, 2008

Because long term trend valuations are finally attractive for blue chip large cap equities; after a 50% decline since last October (and a 10 year compound return of -2.2%) the S&P is now on 11.5x trailing 4qtr EPS, 0.74x revenues and the 3% yield is at the biggest premium to the Feds funds rate in 50 years. I was forecasting six months ago 2009 S&P earnings of $60-70, and top-down, the market has caught up (bottom up analysts are still sharpening their red pencils). Valuation metrics are comparable to the 1974 lows, and from where I'm standing, the fundamental outlook in 1974 was substantially worse; the chart below shows that the S&P fell to its 25 year moving average for only the third time since 1942 last night. 

24 July, 2008

It is still easy to make serious money if you're able to understand market psychology and periodically take advantage of extremes in sentiment. In between times, just stay liquid. My short call on commodities and related stocks since April and long healthcare/banks in recent weeks is a case in point, and both the short and long sides would have returned 25-30% (US banks in the past week have actually had the biggest move of any sector since records began in 1989). Before you reach for the microscope, take a panoramic view with that telescope...

18 December, 2008

With the TIPS market discounting maybe 5 years of deflation, and government bonds generally oblivious to the ultimate success of heroic reflation efforts, the corporate bond market remains in deep freeze. Spreads on Baa credits at an unprecedented 640 bp, or 3.5 times the average spread prevailing over the past four decades, and the highest levels since the 1930's (when US GDP fell 25% peak to trough). Their previous record peak was in the depths of the early 1980's recession at well under 500bp. To put this in perspective, the peak default rate on investment grade bonds during the Depression was 4%, and 21% for all credits; we're currently discounting almost a 30% default rate. That just isn't going to happen, and the current valuation extreme has been driven largely by forced deleveraging by financial institutions and chaos in the CDS market. As retail investors seek income in a global ZIRP environment and financial markets stabilise, I suspect we will see a sharp rally in 2009.

 2 June , 2008

Like China, Eastern Europe is in a race against the demographic clock from a relatively low per-capita income level. The impact on the Eurozone of a slump in Eastern Europe would be significant, as apart from Asia, the region is the biggest market for German and Austrian capital goods exporters in particular. Southern Europe from Italy to Spain is already on the brink of recession, and this would prove a mortal blow for Euro bulls. I turned bullish on the dollar back in March and am still long; I expect a move in the cross rate well below 1.50 over the Summer.

27 July, 2008

All this of course gets the goldbugs hyperventilating, but I'm not one of them; the world really has moved on since Bretton Woods and gold is suffering fundamental demand destruction at these prices as much as oil. In a world of paper currencies managed by very fallible central banks, the least ugly contestant will take the prize, and right now that looks like the dollar.

30 July, 2008

Container traffic is the proverbial canary in the coalmine of international trade, and at Shenzhen in China, the port that serves key high value export industries, volumes fell in June by 0.6 per cent from the previous month and grew only 3.5 per cent against the same month last year; in H1 2008 volumes were up 7 per cent against 14% during the same period last year. At Shanghai, the country's largest port, container throughput has also halved, and these figures are all the more ominous given that June is the peak month for container traffic; exports are now slowing fast. The domestic situation doesn't look great either; China's stockpile of unsold new vehicles rose about 50 percent in the six months ended June, hitting a four-year high, as sales growth slowed.

26 May, 2008

I have been cautious about chasing the bear market rally in the last few weeks, having turned bullish post the cathartic Bear Stearns move. Specifically, I warned at the end of April that the financials rally was premature in the light of no apparent bottom for US housing and contagion to other credit markets, and we have now seen most bank indices slide back to their March lows. In fact the rally over the last 8 weeks has seen not only low trading volumes but narrowing breadth, with resources and particularly oil related stocks (now over 15% of the S&P) spiking with the move in crude. The sharp fall from the 200 day moving average last week in US markets is ominous...the key driver for all markets from the dollar to bonds over the next few weeks will be where the oil price goes next. Far from worrying about $200 a barrel oil in the foreseeable future, I would stress test my portfolio for sub $100 oil, which is far more likely from these levels.

16 December, 2008

In October, Chinese exports in RMB terms fell over 10% yoy, but despite this the trade surplus hit a record $35bn. The explanation is a collapse in imports (not just because of the commodity price slump, but also by volume) which is very bad news for Asian exporters into China. Other measures that cannot be massaged by government statisticians suggest economic free fall; electricity consumption for instance is down 9.6% in November, reflecting huge industrial contraction such as pig-iron production down 16% and raw steel down 12%. I predicted that the export/investment based growth model in China was set to collapse back in March in China 'Miracle' Faces Meltdown at a time when the consensus was wildly bullish, and forecast that GDP growth would halve to mid single digits. That would now be a very good outcome, and I think the country could well flirt with recession next year as it suffers outright deflation

March 28, 2008

Although Germany has improved its global competitiveness steadily in recent years, and is now benefiting from a capital goods export boom to emerging markets, productivity is falling in countries like Italy and to a lesser extent, France. The complacency that surrounds Eurozone growth prospects will likely be shattered at some point this year putting pressure on the ECB to re balance its current inflation focus. In terms of the technicals and investor positioning, the rally already looks very overbought with the RSI at record levels and a potential double top developing below 1.60. The balance of risks at these levels is moving in favour of the dollar, not only against the Euro, but also Sterling as the UK has one of the riskiest GDP growth profiles globally if the credit crunch is sustained very much longer. An initial retracement to the 1.50 level against the Euro looks like a good target and I'm going short the June cross rate.

2 May, 2008

Precious metals are now leading the commodity complex sharply lower, but I expect that just about all commodities are facing a 20% plus sell off in coming weeks, which is already well underway in softs, as the wheat price chart above indicates. When the 'food & energy crisis' becomes front page news, and you see the kind of trend acceleration apparent in all commodity price charts recently, it's a classic sell signal, as powerful at that on the NASDAQ in early 2000 when tech mania was in full swing. Gold is now trading at its 200 day MA and has possibly seen the worst of the correction near term so I'm taking profits, but energy has just begun a sharp reversal that will see crude trade well below $100 over the Summer. Investors should avoid resource stocks in coming weeks as the deleveraging in the commodity bubble will lead to sharp under performance in related stocks from mining and energy to agriculture, and those indices most heavily weighted in these commodity plays.

7 July, 2008

I retain my view that the equity markets are poised to rally strongly from oversold levels, and having exited my short futures positions a week ago am now looking for opportunities to selectively trade a counter trend move. I've also noted the dreadful economic news flooding out of the UK in the past week and and being a Dollar bull in general, I'm opening a short in Stg/$ expectation of a move below 1.80 by the Autumn.

2 September, 2008

So much for a quiet August; contrary calls I made in the last few months have come good with a vengeance, although I've stepped back from chasing current overextended moves. The markets discovered this Summer that an apparently self contained financial crisis, that originated 12 months ago in securitized mortgage lending to US sub prime borrowers, has suddenly proved virulently contagious, across both economies and asset classes. The subtle and poorly understood feedback loops across financial markets and the global economy have upended conventional portfolio strategies. For instance, those 'decoupled' emerging Markets have just hit their lowest levels since March 2007 while classic value trap Japan is at a five month low and the worst performing major developed market. Meanwhile the Dollar index has hit a 2008 high, having had its best month in 15 years in August, while the commodity bubble continues to deflate and financials have soared.  The risks of a year end funding panic as banks hoard liquidity are very high. At the same time, the surplus liquidity from Asian tradable goods exporters is also abating as consumer spending slumps globally. I'm surprised we haven't seen a bear trap move yet in markets from oil to financials, but odds are that we will get one soon; I would still target $60-80 for oil and sub 10,000 on the DJIA over coming months.

14 May, 2008

GDP growth forecasts for China this year have already been downgraded to sub 10% by the IMF and others, but I believe the combination of surging commodity prices, weakening export markets, and a monetary straitjacket created by the closed capital account mean the risks are all to the downside. From a period of sybchronous global growth of over 5%, we will see in 2009 and beyond a synchronous global slowdown if China slows appreciably as I think is now inevitable. Inflation is an issue in all emerging markets (Russian inflation now over 12% for example), and they all face the same policy dilemmas as the Chinese; economic de-coupling is a convenient but dangerous myth.

30 March, 2008

Iceland is arguably probably the most indebted in the world (per-capita) with outstanding debt carried by the three largest banks standing at an astonishing 800% of GDP.If Iceland unravels, not only will a couple of major UK online banks fail sparking panic, but high streets will be littered with boarded up shops as few takers are obvious for these generally low quality assets. Contagion to other highly indebted emerging markets, notably the Baltic states, Turkey and South Africa is likely if Icelandic banks face insolvency and may more generally mark the end of the emerging market debt boom of recent years.

20 March, 2008

In China...M1 narrow money supply growth is still running above 20% and highly inflationary, a reflection of the difficulty in recycling excess liquidity from the trade surplus in a closed monetary economy without currency convertibility and negative real interest rates. Either policy response is high-risk given the structural impasse the economy has reached on its current export and investment led model, and could turn a now inevitable cyclical slowdown to say 7-8 % growth into something far more dramatic and destabilising. Doing nothing and allowing double digit inflation to destabilise the political consensus is even riskier. When the Chinese say 'May you live in interesting times...' they mean it as a curse.

30 April, 2008

There has been one of those periodic outbreaks of bullishness on Japanese equities by several market commentators recently...but in my view the medium term outlook is bleak for a variety of structural and cultural reasons. Much of Japan's recent export growth has been generated by China's appetite for advanced engineering machinery...I suspect China's growth rate, already down to just over 9% on IMF forecasts, will fall to mid single digits by year end, post the distorting effect of the Olympics...the Chinese model is unsustainable and Japanese exporters will be among the biggest losers. Forget the interminable discussions of near term interest rate policy. Japan as a market bears close scrutiny, because aside from peculiar cultural factors, the economic consequences of it passing a demographic tipping point will have implications for investors in many other developed markets, particularly Europe and indeed China, where new entrants to the workforce will halve over the next decade.

19 April, 2008

The credit crunch in the financial sector will be largely addressed by the end of the year, through a combination of massive balance sheet re-capitalisation, and large scale mortgage security swaps by central banks. However, the damage done to the structured finance market and tighter regulation means that bank lending ratios, earnings and dividend growth will remain constrained for years to come, probably reducing trend GDP growth globally by 1-1.5%. Deleveraging will be the big theme for the next couple of years for companies way beyond the financial sector, as financial risk throughout the global economy is permanently priced higher.

6 May, 2008

The VIX is at the lowest since last October, signalling a remarkable degree of complacency given the uncertainties ahead. I recently closed my long index future positions a bit too early, but after enjoying the rally from just above the March lows, and have since watched to see how significant technical resistance levels are tested. My next move will be to short equities again in expectation of a further test of the recent market lows through the Summer, as the earnings outlook for 2009 darkens and it becomes apparent that we face the economic equivalent of a nasty dose of the flu rather than a quick hangover. In economics, if it looks too good to be true, it almost certainly is...it's not called the dismal science for nothing.

11 August, 2008

A commodity crash would have dire implications for the dysfunctional Russian economy, beset by demographic decline, low productivity, 15% inflation and a fragile consumer boom that is vulnerable to a reversal in commodity export prices...Russia is still a Potemkin village that flatters to deceive. In particular, the Kremlin is not the monolithic power it appears, but referees a shifting coalition of clans, from energy barons to the security services and regional bureaucrats, whose sometimes violent rivalries have so far remained misunderstood by many naive foreign observers.

12 June, 2008

I've been  a dollar bull (and gold bear) since March, and it's been a profitable call. After basing steadily for two months, this week we've seen the biggest fall in the Euro/Dollar in 2 years, despite the Trichet rate comments last week. What has been on the other side of the short financials trade? Resource stocks (energy now over 15% of S&P); if I'm right in thinking the bull market in commodities and associated resource stocks will be buried by a slump in emerging market growth and a rising dollar (still waiting for that oil crash, but be patient), we are going to see some brutal sector rotation in equity markets. Miners are already down 15-20% from their peak on falling industrial and precious metal prices, although energy plays have yet to correct. The alternatives for big money switching are pharmaceuticals and financials (US tech is a loser on the strong dollar view, and Nasdaq looks up with events). The benighted Pharma sector has long run out of R&D road but managed decline is a good investment at the right in price, and the sector looks historically cheap on a DCF basis after an interminable bear market.

10 June, 2008

The upward trend in Chinese imports has been a major factor in soybean prices doubling in just the past year. Although corn prices are touching all time highs, wheat and rice have fallen dramatically in recent months despite even a bumper harvest this year doing little to replenish reserves at 30 year lows, and the marginal cost of production soaring with energy prices. An imminent bursting of the investment bubble in industrial commodities from copper to oil will drag the agriculture complex in its wake, but the chart below gives some long term perspective on how cheap food still is in real terms despite the dramatic rises in recent years; wheat fell 80% in real terms between the mid 1970's and 2000, making even efficient commercial farming uneconomic without heavy subsidy, let alone investment in expanding capacity.

20 July, 2008

I predicted exactly a week ago that 'the Freddie and Fannie show may be seen in hindsight as a cathartic moment setting the scene for a sharp rally in coming weeks, particularly in unloved financial stocks.' Well, it's started with a vengeance; the financial sector was up 11% on the week, the KBW index of US banks having lost 25% of it's value by the low point on Wednesday (with a massive spike in volumes screaming capitulation, see chart), only to gain 33% by Friday's close. The Vix briefly shot above 30, Gold spiked, and the Armageddon crowd hijacked CNBC warning us to head for the hills with a crate of gold; I hope they take their own advice and stay in those caves for a while. The last time I called a market turning point was in mid March, when I stated that the economically destabilising activities of hedge funds in financial stocks would have to be reined in, and they finally have been. Oil is next in line for tougher regulation. We have now seen the two hottest momentum trades of the last few months, long oil and short financials, thrown into reverse.

17 July, 2008

My view that China would see growth slide this year expressed back in March has been endorsed by none other than Goldman Sachs who now forecast just 8% GDP growth for 2008 (down from 10%) and are advising investors to underweight commodity stocks accordingly. Bit late guys. The dramatic volatility in US banks on Tuesday (see the capitulation volume spike in the chart below) and Wednesday post the reassuring Wells Fargo results endorse my view that we are about to see a sharp rally in financials from an extreme oversold level not seen since the 1987 crash. As for oil, we saw the uptrend in place since January finally broken yesterday following a sustained slump in Natural Gas prices and the next support level is $120. Crucially, the geopolitical risk premium of $20-30 sustained by tensions with Iran may be about to disappear

15 July, 2008

Unfortunately, like China, Japan is suffering a rapid deterioration in its terms of trade. Excluding food and energy, the CPI was actually down 0.1% yoy in May, reflecting the depressed state of domestic demand. Inflation in Japan is purely of a cost-push nature rather than demand-pull, and that is crucial from an investment standpoint. Average household spending fell 3.2% in May in real terms from a year earlier, with average monthly household income down 0.6%, the third straight month of decline, while unemployment reached 2.7m in May, up 120k yoy. Total employment fell 210k from a year earlier to 64.78 million, the largest decline since June 2004 and the fourth straight monthly drop. Despite the Nikkei having outperformed the S&P since the March lows, largely supported by hopes that Japanese banks are immune from the credit crisis (and after a relentless 18mth slide), fundamentals remain among the worst of any developed economy and I'd expect US equities to resume outperforming imminently in a bear rally.

4 September, 2008

Ironically the success of US policies to support the Colombian government now threaten to undermine the strategically far more important Mexican one, a classic case of the law of unintended consequences in action. It will take more than that fancy new border fence or oil drilling in Alaska to address the looming crisis that will almost inevitably explode by the end of the new President's first term. I have been bearish of emerging markets in general in recent months, and Mexico is one of the most vulnerable to capital flight as the combination of falling oil prices and production creates a fiscal crisis in 2009.

22 October. 2008

Unfortunately, that shoddy analysis ignored not only the fact that EM equities were historically expensive versus developed markets, but also the precarious finances of leading emerging market corporates, who had gone on a wild acquisition spree in the US and Europe, reliant on a sustained boom in commodity revenues to service the hard currency debt they had accumulated, and also surging and destabilising inflation levels. I warned back in May of the huge downside risks. After massive capital flight as foreign investors fled what turned out to be momentum trades hugely correlated with the bubble in commodities, earnings based equity valuations are now about 7.5x trailing P/E and 1,200 bps equity risk premium. However, the Price/Book multiple at 1.2x is still some 20% above the 1998 trough. Technically, MSCI EM is over 3 Standard Deviations below the 200 day moving average, the most oversold market in the history of the asset class. EMs are discounting a more than 50% decline in EPS (vs a 67% fall in 1997/8); EPS growth will decline to maybe 5% in 2009 (against a big minus in the US and Europe). Right now, if we get a global bear rally into the year end (from lower levels, I'm still net short), and a part reversal in the dollar squeeze, I'd look to play those EMs that benefit from declining commodity prices by seeing their terms of trade improve

23 May, 2008

Although local market performance and GDP growth correlate only very crudely for emerging markets, the spectacular potential of Vietnam, both as an offshore manufacturing base for China and a tourist/investment destination, augurs well for longer term performance. While the Vietnamese market has begun discounting a tight credit squeeze and lower GDP growth (although not a potential currency crisis), many other emerging markets such as India and Brazil are still in denial as to the painful trade off between growth and inflation they now face, and downside risks are substantial.

13 November, 2008

Meanwhile, my view in recent posts that markets risked re-testing the October lows is being vindicated on yet another spike in risk aversion, and it is now a question of whether those levels hold and form technical support. Nonetheless, the steady traction being gained by recent interventions in the credit markets means I still see scope for risk assets to surge higher in another dramatic bear rally through the year end. For the moment, the wisest course is to simply watch and wait.

24 September, 2008

11 April, 2008

This is another interesting chart tracking the inflection point for the dollar in previous recessions and it supports my view that the dollar is poised to surprise against consensus and bounce strongly over the next few months; I'm long far quarter $/Euro. Although it sounds counter-intuitive that the dollar should recover in the middle of a recessionary period, it may simply be a case of first in, first out where the bad news is priced in comprehensively to US assets whereas complacency reigns elsewhere as economic contagion risks are always underestimated...if, as I believe, Eurozone and Asian growth is set to slump, the rally could be dramatic indeed and this would have very negative implications for the speculative commodity bubble, particularly precious metals and energy. Mining stocks look very vulnerable to a deep correction on this view and are also technically overbought; they may lead the way down on my view that the bear rally has pretty much run it's course.