DOW 12000 Looks Like the Target

Today brings an even worse market. But it is really thin (very low volume on all the majore index ETFs like SPY or DIA), so just means all the potential buyers are taking the day off. Market closes at 1pm EST today, I think.

Based on the big sell-off in Asia last night and the weak USA market today, I think this downward direction could continue a while, until someone announces how they plan to stablize the financial markets (the Fed? a consortium of global central banks?) The whole world's financial system is exposed to our credit markets. The European, Asian and oil exporter countries have been big buyers of the credit that is now so junky (CDOs, subprime securities, etc). China has been an especially big player. So, the whole world has a stake in how this turns out and the global markets will move accordingly.

I am thinking that 12,000 target on the DOW is looking like a pretty sure bet now. We will see if the market holds there. In the meantime, I am definitely overweight what I had planned for this occassion (too many financials...it is killing me). So, you can have the right idea, and still have poor execution. I will try to learn from this and figure out where I went wrong (mostly, I got myself exposed to high yield that I thought was safe (like Citi), but wasn't. High yield = financials).

None of this market trouble changes my thinking on the the weak dollar - strong hard asset story (oil, gold, mining, metals). That should be a theme for many years. By extension, the Asian economies and currencies will be strong for many years, since that is where the growth is. This means good things for EWY, EWT, EWH (Hong Kong), FXI (China), IFN (India) and even Japan (EWJ) which saw a big strengthening of the yen the last couple days. Japan is the financier and infrastructure engineer for China. I predict that Japan and China will eventually become very friendly to each other, like the British and Americans (they share culture, language, religion, some foods).

So, I will wait a while, but pull the trigger on these type trades once the dust settles. I will use the funds from some of my money in BEARX, which is a bear market mutual fund (wish there was a tradeable ETF for it, but there isn't). David Tice is the manager. He is a famous goldbug and long term bear. Everything he has written about the dollar and our economy over the past 10 years is coming to pass. You can see his site at: www.prudentbear.com. It can get a little scary. He is a real pessimist on the dollar.