Reciprocity

Better get yourself together
And hold on to what you've got
Once the music hits your system
There's no way your gonna stop
--Miami Sound Machine

The S&P 500 Index (SPX) marks new highs for the year, while the US Dollar Index clocks in new lows.

This inverse relationship is no coincidence. In a debt-laden, overvalued world, the only way to push asset prices higher is to print more money. And, of course, we've been doing a lot of that.

Equity prices have been floating higher on an ocean of liquidity.

Should another round of deleveraging follow, then the above relationships are likely to reverse, as individuals sell stocks and buy dollars to cover their debt projects. Given the current approach to money creation, the Fed won't be able to operate the printing presses (read: pyramid credit thru the monetary system) fast enough to offset the downdraft.

Personally, I've been unwinding speculative long positions and building cash because I like the odds of Deleveragaing Round II as we move into Fall.

position in SPX