Continuing on the theme of fall colors, the above picture is from my garden too. Maple leaves falling off from that little thing I planted over five years ago. That little thing ( the maple tree) has now grown over 10 feet

I wanted to touch on the state of the market as we close the month of October. The last two months have been a very strange market. despite watching this market every single day the last 10 years, I could not put my finger on its pulse. Of course if anything I have learned all these years , it is that, expect the unexpected
Normally when bonds rally, when Yen rallies one concludes that there is risk aversion in the air and you would expect a sideways to down equity market, a contracting commodities market. The last two months have been anything but normal, every thing has rallied in sync, the correlation that existed the last few years seems to have all turned upside down.

I have looked for what the pundits are saying in terms of explaining these moves. One answer the QE2 ( Quantitative Easing 2) program which the feds are supposedly going to launch first week of November…although no one knows for sure…yours truly included. Why on earth fed will do quantitative easing when the last easing has not helped much. Doesn’t the fed run the risk of stoking inflation if they did that? In my criticism, I guess I am being moderate , the bond guru Bill Gross has taken it a step further and calls it a Ponzi scheme.

I don’t think this weird market can continue for very long. Something gotta give- either the bonds are going to sell off hard ( which they have already started with a recent 35 basis jump in yields) or Gold, Silver and the likes are going to come crashing down. In the meanwhile, this liquidity driven market has one clear victim- USD is selling off across the board, here are some of the popular currency pairs:

Euro has been flirting with 1.40 , from a recent low of 1.18 ( April 2010)
GBP is above 1.60 compared to a recent low of 1.44 ( April 2010)
CAD ( Canadian Dollar), AUD (Australian dollar)- almost at par with USD (99.9) , compared to in 80s (AUD) and 90s(CAD) back in April. Even slightest of move in the market, and these currencies will overtake USD.
CHF (Swiss Franc) – new all time high: 1.06 from .9 something back in April ( so it has actually overtaken USD).
Japanese Yen -new 15 year high at 80.35 from 90 something back in April ( within striking distance of 79.70- the all time high for this pair).

Precious metals are also on fire
Gold at life time high near $1375 /oz from $1100/oz in April ( not adjusted for inflation).
Silver at life time high $24/oz from $19/oz in April ( not adjusted for inflation).

Other metals like Copper, Iron, Zinc are all in steep bull run.
Agricultural commodities like Wheat , Rice, Sugar, Soybean, Corn are all breaking to new highs ( wheat has jumped 46% since June).

Given the deficit US is running, these macro moves are not unexpected, what worries me is the speed with which these moves are unfolding. A real threat of stagflation- where there is inflation (even hyperinflation), but no growth in real wages or economy to support it. All these forces have been unleashed on the financial markets, thanks to the speculation of QE2 which is now priced in the market. I am not sure if fed ( Federal reserve) will really follow through with its (implied) promise for QE2, it all seems to be setting up for a big disappointment. Meanwhile we are in uncharted territory… with uncontrolled forces unleashed in the markets…time for a new normal.

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Continuing on the theme of fall colors, the above picture is from my garden too. Maple leaves falling off from that little thing I planted over five years ago. That little thing ( the maple tree) has now grown over 10 feet

I wanted to touch on the state of the market as we close the month of October. The last two months have been a very strange market. despite watching this market every single day the last 10 years, I could not put my finger on its pulse. Of course if anything I have learned all these years , it is that, expect the unexpected
Normally when bonds rally, when Yen rallies one concludes that there is risk aversion in the air and you would expect a sideways to down equity market, a contracting commodities market. The last two months have been anything but normal, every thing has rallied in sync, the correlation that existed the last few years seems to have all turned upside down.

I have looked for what the pundits are saying in terms of explaining these moves. One answer the QE2 ( Quantitative Easing 2) program which the feds are supposedly going to launch first week of November…although no one knows for sure…yours truly included. Why on earth fed will do quantitative easing when the last easing has not helped much. Doesn’t the fed run the risk of stoking inflation if they did that? In my criticism, I guess I am being moderate , the bond guru Bill Gross has taken it a step further and calls it a Ponzi scheme.

I don’t think this weird market can continue for very long. Something gotta give- either the bonds are going to sell off hard ( which they have already started with a recent 35 basis jump in yields) or Gold, Silver and the likes are going to come crashing down. In the meanwhile, this liquidity driven market has one clear victim- USD is selling off across the board, here are some of the popular currency pairs:

Euro has been flirting with 1.40 , from a recent low of 1.18 ( April 2010)
GBP is above 1.60 compared to a recent low of 1.44 ( April 2010)
CAD ( Canadian Dollar), AUD (Australian dollar)- almost at par with USD (99.9) , compared to in 80s (AUD) and 90s(CAD) back in April. Even slightest of move in the market, and these currencies will overtake USD.
CHF (Swiss Franc) – new all time high: 1.06 from .9 something back in April ( so it has actually overtaken USD).
Japanese Yen -new 15 year high at 80.35 from 90 something back in April ( within striking distance of 79.70- the all time high for this pair).

Precious metals are also on fire
Gold at life time high near $1375 /oz from $1100/oz in April ( not adjusted for inflation).
Silver at life time high $24/oz from $19/oz in April ( not adjusted for inflation).

Other metals like Copper, Iron, Zinc are all in steep bull run.
Agricultural commodities like Wheat , Rice, Sugar, Soybean, Corn are all breaking to new highs ( wheat has jumped 46% since June).

Given the deficit US is running, these macro moves are not unexpected, what worries me is the speed with which these moves are unfolding. A real threat of stagflation- where there is inflation (even hyperinflation), but no growth in real wages or economy to support it. All these forces have been unleashed on the financial markets, thanks to the speculation of QE2 which is now priced in the market. I am not sure if fed ( Federal reserve) will really follow through with its (implied) promise for QE2, it all seems to be setting up for a big disappointment. Meanwhile we are in uncharted territory… with uncontrolled forces unleashed in the markets…time for a new normal.

This has been long coming, silverlight the streaming video technology from Microsoft is finally getting traction. A testimony to this is use of Silverlight by NBC for its website NBCOlympics.com which brought Olympic coverage to millions of people.Before this the only choice a user had was Flash from Adobe, Inc. Flash has been very popular for a long time but silverlight brings the technology to a wider audience, flash had been pretty much a niche. With silverlight, Microsoft developer crowd can build video application with the tools they have gotten accustomed to (visual studio), so it is going to involve very little learning curve. I am looking forward to it, hopefully with wider acceptance of silverlight, finding expertise in this area would be easier and those Microsoftee’s who had to overcome the Flash (hump) can get up and running quickly. With a much wider pie, building a flashy website should now be within the reach of everyday people..the John Doe’s and Jane Doe’s of the world!

>
This has been long coming, silverlight the streaming video technology from Microsoft is finally getting traction. A testimony to this is use of Silverlight by NBC for its website NBCOlympics.com which brought Olympic coverage to millions of people.Before this the only choice a user had was Flash from Adobe, Inc. Flash has been very popular for a long time but silverlight brings the technology to a wider audience, flash had been pretty much a niche. With silverlight, Microsoft developer crowd can build video application with the tools they have gotten accustomed to (visual studio), so it is going to involve very little learning curve. I am looking forward to it, hopefully with wider acceptance of silverlight, finding expertise in this area would be easier and those Microsoftee’s who had to overcome the Flash (hump) can get up and running quickly. With a much wider pie, building a flashy website should now be within the reach of everyday people..the John Doe’s and Jane Doe’s of the world!