Euro gold has run it's course; The profit machine of BIG OIL is in DEEP TROUBLE!

State of our successful calls
So this is getting repetitive bu today we are starting to pull back on all the negativity. We have been short ALL equities since April 21st when the S&P hit 1208. We maintain our call that the S&P 500 is still the best market to short and that the Euro suffers rightfully in  the hands of its creators, malevolent Eurocrats. In the same esprit, we NOW recommend to cover EUROPEAN EQUITY SHORTS and start analyzing potential stocks that can benefit a low euro...


A 4 MONTH WINDOW...
North American and Asian exporters to Europe are going to report massive losses when their receivables start clicking at 25% less... Oh yes, supposedly, banks are supposed to help their clients hedge their currency risks but we all know that they charge a fortune for that service. When in the full midst of a recession, we all know that safety and R&D are usually the first items to be chopped off. In this case financial safety through hedging really got impacted. An analysis of Wall street desks did not show accrued business in currency hedging. Clients must have reasoned that is has been unnecessary for the longest of time and some people just took on a bad risk... Now the premiums are too high and frankly the export business has all but dried up.

In a fit of  perverse  reasoning ( which usually pays very well for us) we think that some Euro stocks will show stellar results because of a falling euro. The likes of Volkswagen, Nestle, Unilever and other multinational will thrive. They will compete very well at home against imports while their exports will show amazing currency gains. We therefore advise to look for European companies and use a steep sell-off (anything over 5% a day or 9% a week) to build a 1/3 position while instituting discipline stop losses).

While positions are built in Europe, Chinese and Indian stocks look ripe for selling. We have seen serious signs that infrastructure stocks ( landlines telecom notably) have been hitting 52 week lows. By the same token, the predicted fall of the Yen vs. the USD should have you place this no-brainer from May to September currency bet until end of August...

We still do not understand all the upward movement in gold in EURO terms. Interest rates will rise in the biggest deficit member countries. Holding gold will end up being a 10% gainer when there are are much higher returns to be had holding higher yielding instruments.  We know very well that Greece and the other PIIGS might be able to announce IMF, World Bank, ECB intervention. We also fully well know it will take time before the money is in place and there is more grumbling ahead. With a kitty of $750BB no member is ont eh verge of defaulting any time soon. While we are convinced rated charged to members countries will inevitably divide the groups into As and Bs, the latter will pay at least 400bps more to borrow. Gold will then become a very unappealing instrument when the yields will confront low inflation. Good European companies with superb rating will be able to borrow at very favorable rates and showing stellar profits... SO if I can advise our European based gold bugs... change course, sell the metal and buy stocks... remember the date May 17th 2010...


OIL WILL LEAD EVERYTHING LOWER

Here all hell is about to break loose... Support lines are breaking everywhere and the currencies are too high for their own good. With no plan in place to balance its budgets, no political system with a clear mandate to do so, we can only wait for the depression to bring about new lows on North American equities... the Export picture for both March and April were well below our expectations and imports rose in both countries.  that means anemic job growth at best.
With the latest 60 minutes http://www.cbs.com/primetime/60_minutes/video/?pid=pMKLhmm7XQBQ2O_0q8zOFxBFCmY6ixf3&vs=Default&play=true
  which took two segments to explain the BP/TRANSOCEAN HORIZON RIG disaster, we just learned that there is a 16 well system which is 100 times bigger and probably as accident prone... You just need to remember what pictures and videos did to the seal fear industry, the oil spill will literally destroy any profit making scheme for big oil for the next five years... While the Titanic only sank once, in this case, there are hundred of accidents waiting to happen... SO if Exxon and many giant oil companies are hitting 52 week lows, we believe oil is going to hit many more lows. The industry has hit the iceberg of public opinion!

One guy who might enjoy all this diverted attention will be Lloyd Blankfein who must be enjoying  his daily dose of schadenfreude.  Adamant on destroying any possible passing of the Volcker rule, let big bad Oil that the wrap while Wall Street wants to keep business as usual.

WHY o WHY are we surrounded by such people? 

Off on the bike to deliver our second to last stock certificates, we have sold all our private companies. We are going to buy farm land in many parts of the world and avoid many parts of  the paper or electronic economy until an element of accountability and reason return to society... That might take a while...


Good trading to you


DCW