Sent to you by Dominic via Google Reader:
via Think BIG by Bespoke on 7/1/10
The US Dollar and Euro have made big moves today. The Dollar index is down 1.8%, while the Euro is up 2.29%. These moves have caused the Dollar to drop right through its 50-day moving average, while the Euro has broken above its 50-day. This is the first time since mid-April that both have been on this side of their 50-days. If told of this big drop in the Dollar and rise in the Euro and asked which way stocks went today, most would probably guess higher, but that was not the case today.
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Life gets back to normal at some point, you learn to live with your new environment even if the new normal isn't the same as the old. If all correlations were 1.0 there would be no reason to diversify, that's not long-term reality. I made this mistake recently though in thinking that for some reason the market in general would sell off but the individual names I was exposed to would not. This was flawed thinking. I think I'll wait for the obvious end to 1.0 asset correlations before starting to pick individual names again.
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