In late November, it looked as if the yield on ten-year Treasuries ("TNX") was poised on a technical knife's edge. The 20 week and 40 week exponential moving averages closed in on one another, suggesting short-term buying momentum in US Treasuries was on target to overwhelm longer-term selling momentum, sending yields plunging. But in the past two weeks, we've seen something of a stick save. It now appears that short-term momentum in ten-year Treasury yields is positive, as is the longer-term momentum. Evidence of that is the fact that the 20 week exponential moving average for TNX has once again started to trend higher than the 40 week exponential moving average for TNX. From a technical standpoint, it is almost as if Treasury bulls took their best shot, and came up short against Treasury bears. Oops. So what the technical posture of TNX now suggests is that investors are dumping ten-year Treasuries, and if momentum continues to do what momentum often does, the dumping is likely to continue for a time.

If that's correct, then the ramifications for equities investors would be significant. First, the equities markets are itsy bitsy compared to the market for US Treasuries. Think of the capital market as an empty billiards table. The market for ten-year US Treasuries is akin to a giant bowling ball rolling slowly and inexorably towards a little pile of ball bearings (the global equities markets). You can tell a lot about where these little ball bearings will end up just by watching where the big bowling ball is heading.

It has been pointed out that stock markets tend to move in cycles, where boom periods (think 1920s, 1950s, 1990s) are followed by sharp busts (1930s) or lengthy, agonizing, drawn-out flat periods where inflation consumes most of the gains from the prior period (like 1965 to 1982).

We know that the past years have represented a terrible bear cycle, but the question on many folks' minds is, where do we stand in this cycle now?

Various segments of the domestic equities markets, particularly mid-caps and certain segments like technology, are now past an important inflection point, where short-term trading momentum has overpowered long-term investment momentum, as indicated by the fact that the 50 day exponential moving average has crossed above the 200 day exponential moving average for a number of domestic equities indexes.

Abroad, this technical posture is already old news, and it's more or less universal across major markets (you can take a quick snapshot by following global equities exchange traded funds like GWL).

There is a meaningful possibility growing that equities around the world could stage a sharp rally within the next week or so. I say this for several reasons.

It’s such old, stale news, I’m surprised you are reading this article at all. But you don’t hear much about the fate of the U.S. dollar so much these days.

Maybe the topic is just cold, after years and years of steady coverage. Or maybe the mini rally the U.S. dollar experienced earlier this year, and during the peak days of the credit crisis, have convinced a number of people that the dollar has somehow regained its footing, after years of steadily sliding against most rival currencies. Or maybe most of us figure that since our functional currency, what we spend for coffee and mortgage payments, is the dollar, who cares what other currencies are doing?

By official estimates, over sixteen percent of the entire country is either unemployed or underemployed, and in some cases not even looking for work. Over sixteen percent of our creativity, productivity, ambition, hope... rotting on the vine.

This is an emergency of almost unimaginable proportions. It is time for the government to act - not only with the blunt instruments of fiscal and monetary stimulus, but with a laser-like focus targeting unemployment specifically. This can be done through a simple, temporary tax policy change. Not only will this tax policy cost the American taxpayer nothing, it will generate tax net tax revenues instantly.

How should we think about President Obama’s newly proposed financial regulations? I suggest that to do so,investors have to ask a basic question which is this: what is a regulation?

Disclosures: the Author owns shares in FXI and SPY

The financials seem to have been rather dull of late. Stories regarding TARP paybacks have produced nothing more than a yawn in the stock market. Since the start of May, the Financials Select Sector SPDR (XLF) has been stuck on the range, wobbling somewhere between $13 and $11 bucks a share. Ho hum.

It shouldn't surprise us. XLF has bounded up over 100% since hitting an historic low of $6 a share in March. After a run like that, who wouldn't expect a pause, or even more likely, a retracement, in the price of this ETF? And there are fundamental reasons galore in support of falling prices in bank shares. Where to begin? Eager optimism about bank earnings for starters, which set up the stage for wailing and gnashing of teeth come earnings season. A continuing recession that limits demand, borrowing and sours existing loans. The prospect of further write-downs, the prospect of a massive bank insolvency. The list goes on.

At the moment, I’m sitting on some cash and don’t quite know what I should do with it. I’ve already got all the equities I can stand, some (but not many) bonds, some REITs. I don’t want to allocate into hedge funds or stuff like that, mainly because I abhor their ridiculous fee structures. But I sure don’t like the basically non-existent yield I’m getting on my money market accounts either.

What I am thinking I might do is to whip together a quick little absolute return strategy that will produce some tax advantaged yield while I figure out what to do next. So, the first thing I might do is to buy shares of Tortoise Energy – ticker symbol TYG. This is a corporation that invests in master limited partnerships: oil pipelines, stuff like that. Most master limited partnerships just split off considerable amounts of cash dividends, and the tax advantage is that the limited partners treat the first distributions as a return of capital (which is tax free) and after basis is recovered, the balance of distributions going forward are treated as capital gains. TYG currently yields about 9%.

Well, it certainly doesn’t look all that good. That’s right, you know what I am talking about because this is the ten millionth article you’ve seen on this topic. The United States dollar. For all sorts of reasons it appears poised to, once again, drop off a cliff.

Which, personally, I’m going to say is getting like, really tedious. Now, I’m absolutely not going to dwell on all the technical trading stuff about why the dollar appears to be in severe trouble now. Look at Powershares U.S. Dollar Bullish ETF (UUP), and you get the picture. Short term trading momentum as measured by the fifty day simple moving average has dropped below long term investment momentum as measured by the two hundred day simple moving average.

Time for a little honest disclaimer. So, I've been pounding away at the credit default swap market for some time, saying all sorts of nasty things about it - many of which have come to pass. I'm switching camps now. And putting my money where my mouth is.

Why am I now sleeping with the enemy? Because unlike last year, credit default swaps are going to be regulated, and traded with transparency through one or more clearing houses. For that reason, the chance of an implosion (the likes of which basically took out AIG (AIG), and nearly brought down the entire capital markets last year) is likely to be reduced going forward. So too is the prospect of market manipulation - transparency is anathema to manipulative traders.

There's an old saw out there that when short term momentum subsumes long term momentum, you tend to see a change in price trend. Why? Because traders place more transactions than investors, and, thus, set prices. When a short term average overtakes a longer term average, what you're seeing is this fact in action. Over longer periods of time, investors tend to throw in the towel and stop arguing with traders, and once both are on the same page, so to speak, you've got yourself a trend.

Many traders look at moving averages to monitor these developements, using a fifty day exponential moving average (or EMA) to measure short term trading momentum, and the two hundred day EMA to measure longer term investing momentum.

Hey, we've all heard this for over a year now. Basically, the last decade was this debt-fueled rave party redux of the roaring twenties. There was so much credit available to anyone with a pulse that businesses and individuals went on a wild spending spree, leveraged to the gills, pigging out on everything left right and center. Profits exploded as cash registers rang out like Christmas morning bells, magnified by layer upon layer of leverage. This, we are told, is the essence of a credit bubble.

In his recent report to the shareholders of Berkshire Hathaway (BRK.A, BRK.B), Warren Buffett explains why he’s buying and selling the very derivative securities he notoriously lambastes as weapons of financial mass destruction. It’s simple really. He thinks the Black Scholes model is wrong, and lots of these derivatives are mispriced as a result.

I sometimes hear people at rating agencies talking about when credit conditions “get back to normal”. Do any of us really know what “normal” means, though?

The issue here is that investor incentives are simply not what they used to be. For example, in the good old days, a bond holder wanted to get repaid. Nowadays, the bond holder can go out and enter into a credit default swap (hereafter, a “CDS”), and offset (or maybe more than offset) any losses on his bonds just in case the bond issuer goes bankrupt. Needless to say, this state of affairs completely changes the bond holder’s incentives. And changed investor incentives will sooner or later change the very structure of whatever market the investors happen to be in. The important thing about that is that when the structure of the capital markets change in a fundamental way, nothing “gets back to normal” ever again. “Normal” is now something completely new.

As most of you know, the root cause of the credit crisis is that while asset values may fluctuate, debt obligations tend to remain fixed. This is just a basic feature of any credit crisis, and if you want to tackle a crisis, get to the root of the problem, I say. That’s why I have spent the last two weeks sending letters to the Federal Reserve, the Treasury, and to top level managers at Citibank (C), Goldman Sachs (GS) and Bank of America (BAC) suggesting a simple (and possibly very lucrative) tool for putting the banking system back on stronger footing. Thus far, I’ve gotten some positive responses to the idea, although nothing definitive. Time is not our friend, at this point, so now is the time to put the idea out into the public domain, which is the purpose for today’s article. So here’s the idea, and if readers think it sounds good, then go out and try to convince your favorite politician, or your cousin at Treasury, or friend at Citibank to take a really close look at this.

Offer borrowers adjustable principal mortgages, whether newly issued or refinanced. How would an adjustable principal mortgage be structured? It would be identical to a conventional mortgage except the principal balance on an adjustable principal mortgage would automatically adjust downward by a percentage tied to the Case-Shiller real estate index for whichever geographic area the underlying real property is located. The outstanding principal on the mortgage need not adjust upward if real estate values increased, so the product could enable the individual homeowner to retain all of the upside economic risk on his home.

Now sit around in a circle, kiddies, and let me tell you the story of the credit crisis. It goes like this.

Something is afoot. The ramifications of this "something" portend to be significant, although what they will be, indeed, what this "something" actually IS, remains unclear.

In previous articles, I have suggested that there is a bubble of sorts in "bearish trades." I have cited spreads in the credit default market that appear elevated beyond fundamentals, and historic put/call spreads. I have cited abnormal volatility as measured by the VIX. As postulated, credit default spreads narrowed somewhat last week. Options spreads have declined, the TED spread is dropping, and as anticipated, the VIX has fallen off a cliff. Meanwhile, mortgage rates have plunged to some of the lowest levels in history, and LIBOR has dropped to its lowest level since June 2004. Taken as a whole, each of the foregoing developments would seem to suggest that the pile of liquidity that various central banks have doused the capital markets with has begun to flow towards borrowers and other end users, and that risk aversion has abated somewhat. This is not surprising because when money is cheap, using it to buy risky stuff is more palatable. This may perhaps explain why the price of equities has bounced up a little wee bit.