Exit strategies

I do not like USD/GBP anymore... bearish sentiment is already priced in at $1.40 so it does not seem the risk/reward is yet compelling. Most traders now know of the BoE policy of quantitative easing. If it rally which could happen during the global bear market rally, then I'll reconsider a short position.

EUR/USD approached 1.30... I think this is resistance, but we might see a breakout due to the current global "bear market rally." I do not think we are at the bottom yet. This bear market rally would become something shortable (perhaps in equities and commodities) in about a month or so.

I think the yen will get weaker relative to the dollar in this bear market rally... plan to close short yen/long dollar at 104-108 yen per dollar.

I'll close the short treasury trade at around 3.10-3.20% (I do not think yields will rise further in a deflationary environment) and they can fall that much during a deflationary bear market rally.

Thinking about the timing for a short copper/oil play... I am also bearish on gold too although people such as John Paulson seem to be betting on inflation (or numerous fiat currency collapses).

I am still a deflationist... I will not switch to the hyperinflationist or inflationist paradigm unless I see nominial wage increases or if the price of consumer goods such as clothes or cars go up. It is actually funny... many people are afraid of inflation because they experienced rising food and energy prices. I like the Austrian economics definition of deflation: the net expansion of money and credit, not the PPI, CPI, etc. I do not like the normative views of most Austrian economists, but those guided by an Austrian view who forecasted deflation [and that doesn't include Peter Schiff] got it right on the money. According to this view, one could have rising prices during a deflation in food, energy, or in imports (if a currency collapsed) as these prices would be affected by other things not directly related to credit and money supply such as scarcity (can happen during a deflation due to the lack of investment in farms, oil exploration, etc.) and demand in other countries. But again, what is funny about this deflationary bust and inflation... most people still fear inflation because they experienced the dark side of inflation (it can be caused by the symptoms of inflation, but it is not necessarily inflationary) in the form of rising food prices and energy prices (of course in the long run these are legitimate fears), but they do not appreciate one of the ostensibly "good" effects of inflation: nominal wage increases because that has been driven down by globalization.

Again, I do not care what the CPI or PPI (rising numbers do not falsify the Austrian deflation definition) says: we are still in deflation where people will become more thifty so the velocity of money will slow down and people will be relunctant to take on debt. The deflationary bust will last longer than people think and we will soon appreciate its negative effects.