Juggling Dynamite

The past couple of days the US $ is bouncing, up more than 1% so far. At 75.85 this afternoon, if the US dollar index can close through 76.10 over the next little while that would be significant.
Meanwhile the risk trade is taking a much deserved kick in the teeth:
Dec. 4 (Bloomberg) — “The biggest rally in the U.S. dollar since June snuffed out an advance in commodities and equities as an unexpected drop in the unemployment rate triggered bets the Federal Reserve will lift borrowing costs. Gold slid the most in a year and two-year Treasuries tumbled.” See: Dollar rally erases gains in commodities, US stocks after jobs.
The main risk building for investors the past few months has been precisely this: emerging markets, commodities, gold, equities, high-yield debt, have all rallied violently courtesy of the US carry trade extenuating the falling Greenback.
Whether its bad news of geo-political concerns driving a flight to safety, or good news in a better-than-expected US jobs report this morning, both extremes threaten to buoy up the much maligned dollar just as the masses are so confident of its demise.
If we are started into a true economic recovery then we should expect government intervention to pull back and interest rates to begin their long trend up. This is likely to support the U dollar. If the recovery is not taking hold and 2010 continues to disappoint recent hopes, this too is likely to support the dollar. Interesting times…

Ms. Park was a speaker at the MoneyShow in Toronto on October 21 where she sat down for a three part interview with Karen Gibbs. The video clips are now available here:
Part 1: Stock Market not like the 80's and 90's
Part 2: Canada dependent on the US
Part 3: Time to be safe

**Some have been talking about the Euro becoming the next benchmark currency. Not soon– would be my take.
“The Dubai shock may be receding, but have the lessons been absorbed? The world is still awash with debt assumed to carry a guarantee from a rich neighbour. Take the euro zone: like the United Arab Emirates, it is a loose federation with a single central bank but only limited central political power to enforce fiscal discipline on profligate members. Excessive euro-zone deficits now present one of the biggest risks to the global recovery.
Several European countries – Greece, Italy and Belgium – already have debts of more than 100% of gross domestic product. Others will join them in 2010. Across the euro zone, the deficit in 2010 is likely to be more than 7% of GDP. The European Commission is demanding member states bring deficits back below the European Union's limit of 3% by 2013.”
See WSJ: Europe's Threat to Global Recovery.
**Thanks to government stimulus funnelling into mass production, China has too much of most things these days; even wind power:
“Beijing has big plans for wind power as a renewable energy of the future, but China may already have too much of a good thing.
At home, China's power-transmission infrastructure can't handle the intermittent electricity supply already being generated from wind. It is estimated that 30% of last year's wind-power supply went unused.
Despite that bottleneck, Beijing wants more. The government hopes to see 100 gigawatts of wind-power capacity installed in China by 2020, a more-than-eightfold increase from 2008, making wind the third most important source of power in China behind coal and hydroelectric. Even by next year, the amount of wind-power equipment being made will be twice what the nation can install, according to the central government.”
See: Wind Power Winds up China's Competitors
The task is to figure out how to capture and ship China's excess wind power to the rest of the world. The future is coming, we had better get ready for it.
**Despite the incredible price rally over the past 9 months, most investors are still down heavily since the equity peak in 2007 and this is on top of losses in their real estate portfolio. In addition, the bear market of 2007-2009 has been the second vicious bear to ravage the net worth of retail investors over the past 10 years. It seems quite a few are now twice bitten, once shy. (for good reason) To date retail investor sentiment has remained sceptical with bond inflows far out pacing equity in flows over the past several months.
In this video clip FT.Com Aline van Duyen examines why retail investors may not be buying this rally.