indicates that the dollar could be poised for a sustained rally, based on the technicals.In making my pro-dollar argument, I indicated that the prospects for the dollar were strongest againstthe euro, since currencies trade in relation to each other.And we can thank Greece’s near-default for opening up everyone else’s eyes to this fact, too.But there are other fundamentals working against the euro. Namely, the winding down of governmentstimulus measures in the eurozone.Once they end, demand will certainly suffer. And it will also draw attention to a key weakness of manyEuropean companies: They didn’t cut costs as aggressively as their American counterparts during therecession, so their bounce back to profitability will be subdued.In addition, a strong earnings season for U.S. companies in relation to their European counterpartsshould accelerate the dollar’s rise and the euro’s fall.
Contrarian Investment #2: Bye-Bye Shanghai?
Boy, I really got the masses steamed with an article on the China sell-off four months ago.All I did was suggest the country’s run-away stock market could use a cooling-off period – and gave 10reasons why that would happen.Some folks couldn’t bash their keyboards fast enough, with a few even calling for my resignation.Apparently, it was blasphemous to speak a bad word about China in the investment world.Fast-forward to today and the list of parties taking a cautious stance on China is growing. For example…
Pimco’s Bill Gross.
Legendary short-seller Jim Chanos.
The European Union Chamber of Commerce in China.
Fang Gang, who heads the National Institute of Economic Research and advises China’scentral bank.
The China Banking Regulatory Commission.
Stratfor, the global intelligence company referred to as the “Shadow CIA.”I’ve even seen marketing pieces in the newsletter industry tapping into this change in sentiment.Not only that, the fundamental evidence continues to mount in favor of a China correction.For instance, data from the People’s Bank of China shows a 126.5% rise in overdue credit-cardaccounts. That’s bad news for any economy. But it’s terrible news for China bulls, who are counting onChinese consumers to keep spending.Again, the advice here is simple – and two-fold:
At the very least, tighten up your trailing-stops on any Chinese stocks you own to ensure thatyou walk away a winner.
If you can stomach being a contrarian, consider selling short or buying puts on Chinese stocksand ETFs.
Contrarian Investment #3: Stepping on the (Natural) Gas
“Is Natural Gas Down for the Count?”