Jack the Pipper

The all one market concept, by viewing “tops” soon after the Fed officially announced QE2 on November 3rd, suggests that all good liquidity news was already in the price:

The Ireland news and related concerns are calming a bit, even though there is still plenty of attention on China after they bumped up reserve ratio requirements again today. Take a look at the VIX action yesterday (latest price bar); seems the market was ready for a risk-back-on type of day.

Keep smiling: the US dollar has been supported by activity in China and Ireland. Throw in a relapse of the US housing market collapse and you’ve got yourself a recipe for a big, fat risk sandwich.

Is it a stretch to say the Chinese wish to destroy the United States? Maybe! But it isn’t a stretch to say that China wants to become the primary global economic and military power in the world.

It may look like China is acting civil in responding to the rest of the world’s fingers pointed squarely their lead role in an imbalanced global economy. After all, the yuan has strengthened versus the dollar in the last couple days; China has been hiking bank reserve requirements and raising interest rates … with unusual frequency.

The fun has begun and fiscal conservatives have taken back control of the US House. The rally in US stocks over the last couple months has been credited in part to this expectation that a shift in power within the US House of Representatives will help ease the burden of potential taxes and regulations that have heretofore been among the biggest reasons corporations have held back from hiring and investing.

US GDP was at least as good as expected this morning, taking some pressure off the risk aversion trade and hitting the buck today. And the price action in the dollar-giving back overnight gains and getting hit now-suggests traders see the GDP as evidence QE2 will be at least as generous as their expectations. It is the muddle-through scenario of the Dollar Smile framework

I keep saying to JR and David: you really couldn’t make this stuff up if you tried. These guys at the top are supposed to be the “best and brightest” minds we have to offer; if that’s true we should all be building shelters while we can still afford bricks.

Japanese yen intervention: Japanese officials may be awaiting a more substantial dollar correction, but will it be left to Prime Minister Kan and his note card? Or will the Nikkei have the biggest say at the end of the day? A divergence of interest …

Yesterday it looked as though the bottom was going to come out from under the euro and the Australian dollar. But when the US session opened up and stocks made new highs, well, the euro and Australian dollar were dragged higher too.