In Your Face
May 14th, 2008 by 
reality
What’s the hard - contrarian - trade today?
- Short equities, especially tech
- Short oil and commodities in general
- Long bonds
- Long the US dollar against the euro
- Short the yen against the dollar
Since you ask, yes, I’m feeling a bit lucky.
Posted in Asset Classes, Commodities, Energy, Fixed Income, Inflation & The Dollar, International, Metals & Mining, Stocks, Technology | 
May 15th, 2008 at 8:19 am
While I agree on the Dollar vs the Euro and short stocks/tech (I would add in emerging markets), I differ with your commodities, bond and Yen statements. I would say that being a contrarian just for the sake of contrarianism can be expensive, as the mob tends to be “right” for extended periods. While I agree that there are tremendous speculative forces in play in oil in particular, I keep reading everywhere I look about people picking a top in oil. Many of the newsletter and blogs I read are all over the DUG ETF trying to short oil stocks. I don’t own’em, but I wouldn’t short them either. It seems to me that the trend tends to shift when all of the serial top callers finally throw in the towel, and I don’t think we’ve seen that yet.
As for the Yen, I actually bought it back this week versus the dollar, though I like the Yen/Euro cross the best. While correlation/causation are certainly different, the Yen and Swiss Franc have been inversely related to stocks/risky assets over the past year, and I would expect that to continue. Indeed, Japan has very little of the problems the US and Europe have and while their economy is likely in or entering a recession, they don’t have the massive credit debacle the US and Europe has - that along with risk aversion could make the Yen a flight to safety currency as the next leg of the credit unwind occurs.
Cheers!
May 15th, 2008 at 8:34 am
Yes, look at the call premiums on DUG.
I don’t think those trades are necessarily “ready” yet. But I have a sneaking suspicion that they are all going to move together. No justification, just a feeling. When commodities break, stocks will too. Bonds - just the haven of choice, that’s all.
Japan may become the lender of last resort for many, simply because their banks are large and should still be able to lend while the US banks pull back. That will lead to yen selling.