Wednesday, January 11, 2006

Houstan we have a PROBLEM

Europe plans on raising it's rates more. This will tighten their money supply. If their quantity of currency on the street is reduced it becomes worth more than ours. It's a simple balance act. The fewer euros to dollars the heavier the existing euros become. If the dollar starts fallign against the euro and we are paying a lower rate on our T Bills. It makes less sense for europeans to buy US T bills. Over half the T Bills are own by foreingers. If their buying pressure drops as they scratch their heads, our T bills won't be bid up (rates will go up).

The last five days the dollar has been weaken. Now the reason is validated.

Despite the crap the Feds said about inflation being moderate. Our long term rates are about to jump 1/8 of point - taking home builders down a few points.

I suggest you use the Fed bullshit to sell on the homebuilders rally tomorrow. Then buy back after the rates pop a bit on Monday.

I could be wrong in the short term, but I know I am right in the long term on my bullish stance on home builders. If I am wrong in the short term and Home builders are higher on Monday, so be it. I'm buying back earlier next week one way or the other.

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