Professor Elam

Monday Dec 7 2009

Five days ago Dec  2 we showed the deteriorating breadth, fewer and fewer stocks participating in the rally, we suggested then that the fally was long in tooth and that lower prices lay ahead. 

Well that was clear and now those short the Dollar to buy leveraged assets elsewhere, like gold, oil, and stocks, are buying the Dollar this morning and selling positions. 

The news however wants to link a possible FED tightenting to this. The markets will always go where they want and the news will always try to link an event with market action. There is no necessary correlation. For months various pundits have warned of hyper inflation. This will come but not yet. When the government starts throwing trillions from helicoptors into the economy, it will finally show up as inflation. But in the mean time the deflation has to end first. Dubai and City Center remind us of too much debt against over valued property. And speaking of news

Dubai World 'may' sell assets.

Note in this article how the government of Dubai seeks to distance itself from the debtor it created Dubai World. Success has a thousand parents, failure is ever the orphan as the saying goes. First of course Dubai would have to find a buyer, rather like Ford seeking the elusive buyer for Volvo, GM seeking the buyer for Saab, all the REITS seeking buyers for their over priced properties….Deflation first.