DT Analysis SAC

Ignacio Merino 636

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Lima, PERU

Phone: 51-1-98958-3041

E-mail: info@dtanalysis.com

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DAILY REPORT

(03/19/09)

A Marvelous Idea!

Members of the Congress and Senate are “outraged” that AIG would pay out US $170 million to derivatives traders for a job well done. One politician thought that suicide was a good remedy. Newsflash! Timmy the Tooth, a/k/a Tim Geithner the Secretary of the Treasury, knows how to get the bonuses back from AIG. He is going to deduct it from the next bail out package, around US $40 billion, that will be given to AIG within a month! Personally I think people fail to see the forest through the trees. As ridiculous as all of this sounds the real disgrace is that AIG is using your money to pay foreign banks and institutions 100 cents on the dollar for the counter party risk derivatives they hold. Billions and billions of dollars are going overseas in return for their silence. How is this helping the average American? It isn’t!

On a separate note, today will be spent waiting for the all-important Fed statement due out around 2:15 pm EST. In that statement, investors will be looking for a sign that says they will be buying treasuries in an effort to liquefy markets. Bernanke mentioned such a possibility late last year and then seemed to put it on the back burner. As a result the bond market sold off. Now the scavengers are hopeful to see the renaissance in today’s statement. Personally, I would be surprised if the Fed issued such a statement in light of China’s concerns with respect to the security of their investments. Such a statement would be an open invitation for China, and any one else for that matter, to belly up to the trough and sell your bonds. It would also be a nail in the dollar’s coffin and a big step toward a dollar disaster. The June US Dollar Index appears to have made

an important top on March 4th and has been declining ever since. Today the June US Dollar is trading down .59 at 86.77 and looks like it wants to go lower.

Nothing ever moves straight down, or straight up, and that includes the dollar, but you’ll see that down will be a lot easier than up from here on out. The next level of support is at the 85.90 to 86.04 level and it should provide a bounce; for how long and how much I have no idea. Sooner or

SUPPORT RESISTANCE

US DOLLAR 86.04 87.14

85.90 87.59

84.53 88.17

later the dollar will begin to price in the fact that it must fall to close to zero since there is no other way for the United States to meet all its obligations. Right now the SI, MACD, and histogram are all headed down as the US Dollar Index approaches the 50-dma at 86.03. If the dollar falls below the 86.00 level on two consecutive closes, I look for the decline to accelerate noticeable.

Today gold is taking a good beating due to the fact “that there is no longer a need for safe haven buying”. It’s as if everyone believes that all of the world’s problems have been resolved. Nothing could be further from the truth. Yes it’s true that the stock market has enjoyed a temporary respite from the incessant selling that dominated for more than a month, but that does not translate into a sound economy and bright future. Almost one hundred years ago a group of gentlemen, half of them were foreigners, sat down and devised an ingenious way to transfer wealth from the richest country in the world (America), into their own pockets. The key was the dollar and the process would be so slow that it would take decades and no one would be the wiser, much like a good parasite can live undetected off of a host for decades. Unfortunately, this parasite got greedy and is killing its host. What you’re now witnessing are the death throws.

Many talk about the coming inflation and today’s inflation numbers were less than expected. As most of you know by now, I do not see inflation but rather deflation. Inflation could occur if the US alone printed money, but everyone is printing money and that money is just fiat paper. It is backed by nothing just like the so-called “toxic assets” that occupy so much print in the news. Of course some countries have reserves so their currencies will decline at a slower pace, but they will decline none the less. Since there will be excess supply, the paper must decline in value. Along with it will go sales and income as well as the demand for most goods and raw materials. Exports will shrink and unemployment will skyrocket around the world. Those few that can will search for a store of wealth, and the only one that can’t be devalued is gold. Stocks, bonds, and fiat currencies, all paper, will succumb to gold sooner or later. Could gold succumb to deflation? Only over the short run and only because some individuals are selling short large quantities