|I don't view it as a straight deflation, inflation argument. The deflation will occur in anything heavily dependent on cheap, easy credit (which will be withdrawn). Inflation will occur in assets that have limited access to cheap, easy credit. My thesis is therefore pretty straightforward, there is a credit, bond and housing bubble of biblical proportions. You'll want to be out of the way (or short) of anything that will be hurt by an uptick (despite the fact that almost everyone thinks rates are a one way street down, it can happen) in rates, or a widening of the now too narrow credit spreads. Watching this like a hawk:|
I've been gradually increasing (and averaging up) my short exposure in the financials as this rally has progressed. I finally went with an additional "what the fuck" (and I mean exactly that) shorting flurry last week after spotting the big drops in the RP pool. I have clearly missed picking a top and the duration of this rally, but the financials are: CFC, GS, JPM, LEH, MER, C, MBI, and MTG. I also shorted LOW per our last exchange at around 46,and didn't cover on the swoon below 40. I'm looking for more retailer shorts as I think they hit the fan on sales, bloated inventories, and excessive stock price valuations. I have a bunch of naked QQQ calls sold, and actually somehow (time decay) have been able to dodge a serious bullet on them. I'm hopeful after the reversal Friday.
There are low inventories, shortages and potential bottlenecks in many key commodities, especially energy, some metals, and possibly grains. I have cleaned up nicely on my energy trades put on late last year, and early this at excellent entry prices. My timing on these has been far superior to my recent shorting activities. I'm hanging tough with those.
This interview with Bill Fleckenstein pretty closely reflects my views, although I think the top of this rally was last Friday's intra-day reversal.