Golden5: Context : YEAREND ASSESSMENT

KEY THEMES 2009/10

1) Deleveraging Continues

2) weird markets

3) The Dollar will be the key tell
Correlation can be off for a month ot two (or 6) but the Dollar devaluation has driven this market and should continue doing so.

The Dollar is also the deleveraging currency, where write offs in toxic assets will destroy dollars and thus through scarcity considerations appreciate the US$. This could effect all asset classes that have fed of the Dollar weakness.

4) Dollar Devaluation and Curve Steepening

Centralbanks can only control (if at all) the short end of the curve. A falling short end and a rising long end project stress aginst the next round of mortgage resets in the US......

5) The real Asset Values (as measured in Gold)

The Dollar devaluation has covered up the real devaluation we've experienced since 2000. Will this trend continue ?

6) This time is different ?

look here and here. I have my doubts about that.

Bottom Line:

Every post WW2 recession had at least 1 interluding quarter with a positive GDP print, like we had in Q3. Technically are we still following the 1938 roadmap at least until Jan 15. The last 30min of the last trading day pushed the market right back into the Fibonacci 50 Retracement Zone. Deleveraging still continues meaning we still seem to be in a Balance Sheet recession.

In order for bottom to be in we don't need US$ strength and do need fresh lending. The Dollar and Gold will tell the story.