Fundamentally, nearly everyone, at some point in time, has seen a chart of the America’s monetary base and its near parabolic expansion as a result of Ben’s printing. This should, and does, scare investors from the USD. The counter argument to the former is that fundaments do not ‘play out’ in the short term. It may be prudent to fade the prevailing trend in the market, for when everyone is leaned one way in the short term, it is probably a good idea to do the opposite. For example, a few days ago nearly every contributor on CNBC was bullish and the next day the S&P 500 futures were limit down. Extreme example, yes, but this proves the power of ‘group investing’ (a combination of group think and investing) and how dangerous it indeed is to market structure.
This trade is actually, more or less, confirmed by the lackluster performance in gold and silver. A stronger dollar is naturally bad for the metals complex. Moreover, the looming fiscal cliff also confirms the trade; for traditionally when the market goes down, bonds and the USD rally. It is difficult to put on illogical trades, but sometimes the best trades are the hardest to put on.
There is not much interest in the options, and the futures curve does not have many contracts listed; as a result other products could be used to play this thesis.
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