This Close Gets Bought Hard – Kong

I’m usually not one for moment to moment market commentary – but on occasion (for example my “risk on” post some weeks ago with reference to getting short JPY) I have been known to do so.

Take it for what it is…as this is a free blog – but if I was ever a buyer of U.S equities (which as a general rule I am not) – I would buy this close – HARD.

Forgive me for a small poke as well but….the American politicians should be absolutely ashamed of themselves. I’m not sure if anyone living in America still thinks they live in a “free country” – but once again stock holders are more or less “held hostage” till (let me guess) late Sunday night…before getting on with their lives – some I’m assuming worried if they will still have a job in 2013 and/or if additional tax hikes will break them.

Its appalling. Its embarrassing. Shame, shame, shame…..

So….obviously – buy stocks!

Im getting short the USD hard as well staying short JPY – long the commods here, as well getting long EUR late this evening or sometime tomorrow.

Good luck America! Good luck!

The Political Theater Continues – Time to Profit From the Chaos

Let me be crystal clear about what’s happening here. This isn’t some random market volatility we’re dealing with – this is manufactured uncertainty created by a broken political system that has turned governance into a circus act. The debt ceiling drama, the fiscal cliff nonsense, the endless brinksmanship – it’s all theater designed to extract maximum political capital while ordinary Americans and global investors pay the price. But here’s the thing: predictable chaos creates predictable opportunities.

The market reaction we’re seeing is textbook risk-off behavior driven by artificial constraints. USD weakness across the board, flight to safety in traditional havens getting disrupted because one of those “safe” assets – U.S. Treasuries – is at the center of the political storm. This creates dislocations that smart money can exploit, and that’s exactly what we’re going to do.

USD Weakness: More Than Just Political Theater

The dollar’s decline isn’t just about Congressional incompetence – though that’s certainly a major factor. We’re looking at fundamental shifts in how the world views American fiscal responsibility. When you’ve got politicians playing chicken with the full faith and credit of the United States, international investors start hedging their bets. The DXY breaking key support levels isn’t coincidental; it’s institutional money repositioning for a world where the dollar’s reserve currency status faces real challenges.

I’m particularly focused on EUR/USD here. The Euro has its own problems – don’t get me wrong – but relative to the circus in Washington, European politicians look like seasoned statesmen. The ECB’s commitment to “whatever it takes” suddenly looks more credible than America’s commitment to basic governance. Target the 1.3200 level on EUR/USD as the first meaningful resistance, but don’t be surprised if we see a run toward 1.3400 if this political deadlock extends into next week.

JPY: The Contrarian Play Everyone’s Missing

Staying short JPY might seem counterintuitive in a risk-off environment, but this is where understanding central bank policy divergence pays dividends. The Bank of Japan is committed to monetary expansion regardless of global risk sentiment. While the Fed might pause or pivot based on political pressures, the BOJ has structural deflation to fight and won’t be deterred by temporary safe-haven flows.

USD/JPY weakness is temporary noise. The real trade is EUR/JPY and GBP/JPY on the long side. These crosses offer exposure to JPY weakness without the political baggage of the USD. The carry trade mechanics haven’t changed – Japan still has zero interest rates and explicit devaluation goals. When this political theater ends (and it will end, probably Sunday night as predicted), the JPY short thesis reasserts itself with vengeance.

Commodities: The Inflation Hedge Play

Here’s what the politicians don’t want to admit: every one of these debt ceiling crises ends the same way – with more debt, more spending, and more currency debasement. The “solution” will involve kicking the can down the road with expanded fiscal programs that ultimately weaken the dollar and boost commodity prices. This isn’t speculation; it’s pattern recognition.

Gold’s catching a bid not just as a safe haven, but as an inflation hedge for the monetary expansion that’s coming. Oil benefits from both USD weakness and the geopolitical premium that comes with American political instability. Agricultural commodities get the double boost of currency debasement and supply chain concerns when global trade finance gets disrupted by debt ceiling drama.

The Resolution Trade: Positioning for Sunday Night

Here’s the playbook: they’ll reach a last-minute deal, probably announce it late Sunday to dominate Monday morning headlines. Risk assets will surge, USD will initially strengthen on relief, but then weaken as the market realizes the “solution” involves more fiscal irresponsibility. This creates a perfect entry point for the medium-term USD short thesis.

The key is positioning before the resolution, not after. By the time CNBC is celebrating the deal, the easy money will be made. We’re buying the panic, selling the relief rally, then repositioning for the longer-term implications of America’s fiscal recklessness.

This isn’t just trading – it’s profiting from political incompetence while protecting your wealth from the consequences of that incompetence. The politicians created this mess; let’s make sure we profit from cleaning it up.