Tuesday, January 5, 2010


Just a quick note regarding commentary by Jeff Saut from Raymond James. His notes come out every Tuesday morning and I like to read him. I always remember that he doesn't get paid to be bearish, however he has a great style and he has been pretty good in last year's surge, by being bullish and bearish throughout the year..

His best quote is found here, which summarizes my thoughts about this market as well. On a relative basis, I'm still concerned about the dollar even though the first two days of the trading year are showing us it is back to usual on the weak dollar, long commodities trade.

Last Monday we wrote, “As we enter the New Year, we are once again turning cautious because the Treasury market is breaking down (higher rates) and the U.S. dollar is rallying. . . . Therefore, we think it prudent to ‘bank’ some trading profits and hedge some investment positions as we approach the new year.” Moreover, one of the lessons we have learned is that the beginning of a new year is often punctuated with head fakes, both on the upside as well as the downside. One of the greatest upside head fakes was in January 1973 when in the first two weeks of that year the DJIA rallied to a new all-time high of 1051.70 before sliding ~20%. While we are clearly not predicting that, what we have indeed experienced since the March “lows” is the second greatest percentage rally (69%), adjusted for time (nine months), since the 1933 rally. Following that 1933 explosion of 116% in just five months came a pretty decent downside correction. Since we tend to be “odds players,” prudence suggests some caution is again warranted.