Wednesday, June 11, 2008

Historicist Rant

not surprisingly, the dollar weakened a little against the euro and its buddies, as oil futures jumped back up again today. I've noticed that a mild contango has started to develop in the oil market, especially the Brent contracts. so a contango is developing at the same time prices get jacked up supposedly on concerns of a 'supply drop'. hmm.

I also find it comical that all the currency folks are saying the dollar's moving because of oil, while the energy folks are saying oil's moving because of the dollar. I can just imagine two hedge fund managers at a cocktail party. 'yeah, I'm shorting the dollar cus oil's going up.' 'really? funny you should mention that, I'm long oil cus the dollar's going down!' 'so, how much higher you think oil's going?' 'uh, dunno, where ya think the dollar's going?'

it's all a wechselwirkung, of course, though I realise that simply enunciating a foreign word does little to elucidate matters. as a practical matter, the trick seems to be to notice the formation of correlations, exploit them, then keep your eyes peeled for signs of divergences, imagining how they will end up altering the formation of the Big Picture, or the wechselwirkung if you will. it all ends up as a very touch-n-go affair. so it's no surprise that an analyst's performance exhibits streaks of prescience followed by periods of confoundment. but certainly one must initially have a grand historical framework within which to operate. and the framework moreover must be valid. my framework, which I've explained in other places and to many many folks in conversation, I've called by the name of Conflation since 2004. in a phrase it means 'too much money chasing too many goods.' at the moment the potentiality of Conflation is but a pale fire in the foggy mind of the Collectivity. of course that's a lot of progress from a few years ago. back in 2003 or 4 or 5 was there a single other gold bull who was at the same time not predicting 70s style interest rate scenarios? I can recall not one in the 'contrarian' circuit who shared my outlook. and to this day the commentators debate the false dichotomy of inflation or deflation. and then there's that other word 'stagflation' they ripped from its historical installation and try pass off on us.