Tuesday, November 1, 2011

The Euro Mess is the Dollar's Gain

It was just four days ago when the world celebrated the European rescue. Now that has all changed. Carl initially pointed out that the European bond market was not happy with the bailout, and now everyone has joined the party. Not only are 10-year Italian bond yields surging to a worrisome 6.25%, but the Euro is selling off heavily and European financial stocks are well below pre-bailout levels. This is all possible due to Greek Prime Minister George Papandreou. He has called a referendum on the new EU aid deal, which could backfire if his coalition loses the vote.

Due to the increasingly hilarious (in an uncomfortable sort of way) situation in Europe, our Rising Dollar position has rebounded very nicely. The chart below shows the Dollar Index. We were very excited in September when the price level broke above the green line, but became nervous when the green line broke in October. However, after an amazing 4% rally, the index is now once again trading above the green line, the 50 Day Moving Average and the 200 Day Moving Average. We're glad to have our safe-haven hedge in a Rising Dollar Fund.