I think Denninger has it right. He's a mite theatrical about it, and I don't believe the "collapse of everything" is as near as he thinks, but principally he is correct (in my opinion). QE is a not even a band-aid. Trying to think of a suitable analogy here... it's more like a bastardized short term fix of a failing earthen dam, without draining the water behind it. All it does is allow more water to accumulate, which will eventually wipe out everything "down-stream" once it inevitably lets go.
So what to do? Selling long bonds and having the balls to hold through additional Fed attempts is one obvious bet. You don't even need to worry about timing your entry. It's RIGHT NOW. However guessing the timing of the payout is much harder, since we don't know how hard or long the fed will toil to continue distorting reality. You might have your $ tied up for a while (or not, you never know).
In my IRA I am long Energy and Food equities. I've bought an Energy ETF, and some individual food & fertilizer companies. If only the companies can survive the impending short term dislocation in the credit market, I think it'll make a decent hedge against the dollar going to shit (using the term "hedge" in an extremely un-sexy, non-sophisticated manner here).
The one thing that is throwing me for a loop is the relative strength of the dollar right now. Having interest rates go up should attract even more capital, further driving the dollar up against other currencies. I just haven't quite figured out what the deal is here, or what will drive the tipping point to a sharply declining dollar.
I guess thatâs why Iâve looked to commodities. Iâm not sure if the time for that has passed. Oil above 60 bucks can only be driven by lots of spec money and inflation-hedgers. I think I read that USO controls a third or more of all prompt-month NYMEX. Food and Fertilizer companies need to be able to be able to withstand the impending shock, so thatâs a little bit of a gamble, but whatever. No pain, no gain.
Some people are saying that f/x traders will come out ahead, but Iâm not smart enough to get the timing right, or to understand what currency is not exposed to a dollar death-spiral. Well, Krugerrands and Eagles maybe, but the entry there has obviously passed (when I say âobviouslyâ I am usually wrong, LOL)
