Tainted Alpha

Well I must admit that I don’t have a clue what’s happening in the markets now. The markets opened positive on large positive surprise in non-farm payrolls and in mid of trading  everything reversed. Three reasons come to my mind: first is a deeper look in unemployment numbers; the second one would be the new low in Nakheel bond indicating a stall/collapse in Dubai World debt restructuring efforts and the third would be distorted correlations at opening today that disoriented algorithm driven trading.

Calculated Risk Blog provided superb in-debt look at the unemployment figures: If the Economy lost Jobs, why did the Unemployment Rate decline? If the details would matter we would probably not rally 65% from the lows…

Nakheel bond? I titled one of my posts on Dubai: One Day Scare, I tend to think it will remain just that.

So, I would bet on distorted correlations. U.S. dollar moving 1.6% up caused gold to fall 5%.

Chart 1. U.S. Dollar Index

Chart 2. SPDR Gold Shares

So the question is: What if the U.S. dollar reversal continues? It could get ugly…

Dubai, Dubai World, Gold, Nakheel, U.S. Dollar

This entry was posted on Friday, December 4th, 2009 at 2:12 pm and is filed under Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.