Date: Tue May 03 2005 15:24
trotsky (@stock market reaction to FOMC) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
usually the market's reaction following immediately on the heels of the FOMC rate decision is a fake-out, or irrelevant ( the decision was after all known well in advance, and the market has given it the thumbs down quite some time ago ) .
anyway, it's interesting that financial stocks seem to be the first ones to crack here. of course their new down trend is already well established. financials comprise the bulk of the SnP index's capitalization - so what happens to them is quite important. since the bond market refuses to buckle ( knowing as it does that the economic recovery is a mirage... ) , the profit margins of lenders get squeezed ever more by the rising short term interest rates.
well, we probably shouldn't expect the Fed to squeeze its bankster-buddies too much. nevertheless, it's noteworthy how INESCAPABLE the deflationary era cycle really is. remember all the heroic talk about the magical powers of the printing press in 2003?
but in the end, the Fed has done what EVERY central bank in history has done: it has raised rates into the feeble first post-bubble recovery - and thus ensures that the cycle will play out just as it always has. in other words, the deterministic nature of this long wave cycle can NOT be altered by careful central economic planning...except that it can of course be made worse ( the housing bubble proves that at least in that respect, success has been achieved: it HAS been made worse ) .
Date: Tue May 03 2005 14:34
trotsky (Bleuler@Buffett) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
actually no, he IS perfect, as far as investment success goes. like i said, the performance of any given quarter or even year is hardly relevant in arriving at that judgment. what IS releveant is that he managed in the space of 3 decades to ascend from relatively humble beginnings to becoming on of the richest people on the planet...and enriching countless other investors in the process. i don't know how an investor is supposed to come closer to perfection - you mean being number ONE ain't enough?
Date: Tue May 03 2005 14:15
trotsky (@FOMC) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
the Federal Funds rate is now up 200% from its lows - while interest rates at the long end have declined sharply across the globe, even in the US in spite of the weak dollar. the monetary bureaucrats are focusing on thew wrong bugaboo ( 'inflation' ) - they have confused the typical post bubble inventory cycle upturn with a genuine economic recovery. they're in for a big surprise.
Date: Tue May 03 2005 13:56
trotsky (Bleuler, 11:48) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
i don't see in what way i have made it a 'personal issue'. i merely pointed out that doubts about Buffett's investments have been voiced on other occasions in the past as well...and that it was the doubters who turned out to have gotten it wrong in the end, not Buffett.
Buffett-watching is of course an interesting exercise...but the success of a 21 billion investment can not be judged by monitoring its quarter-to-quarter performance. Buffett's to date near-perfect long term investment record suggests that when he commits that much money it's best to be on the same side of the trade...even if the trade is not profitable every quarter, or even every year.
Date: Tue May 03 2005 13:37
trotsky (Buffett & gold) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
Buffett's dislike of gold ( incidentally, his father was a strong advocate of the gold standard ) is well-documented. it probably has to do with his political philosophy, which is remarkably statist in its orientation considering he's such a successful capitalist. probably a bromide for the conscience. in any case, a statist/leftist political outlook basically requires that one dislike gold.
Date: Tue May 03 2005 13:31
trotsky (art-vandila, 11:12) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
as far as i know the same criteria that invoked hedging strategies were also the rationale for the carry trade ( i.e., borrow gold at 1% or whatever, sell it and invest the proceeds in bonds/notes ) .these strategies depend on the gold contago being very high, which usually is only the case in a relatively high interest rate environment. the decline in hedging has probably gone hand in hand with the dissolution of such carry trades ( which have only been a drop in the ocean relative to the bond market's size anyway ) .
i'm not aware of any evidence of the opposite trade being put on by anyone ( short bonds/long gold ) . it's possible that such strategies were pursued in the 70's, but today? never heard anything about that happening...and there's very little incentive for this type of trade anyway, since gold and bonds have exhibited a strong positive correlation in recent years ( as opposed to the negative correlation that obtained in the 70's ) .
the fact that bonds correlate negatively with stocks and positively with gold instead of vice versa is inter alia one of the indications showing that we're in a deflationary rather than an inflationary era.
Date: Tue May 03 2005 12:59
trotsky (@permabear1 (Thoreauback)) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"What baffles me is why more people don't see this coming and load up before the explosion."
i'll offer a comment too. the supposed 'price explosion' has been talked about for years on end ( by the usual suspects ) . now, recently we had a bona fide commodity bull market - the strongest since the late 70's. and what happened? every other industrial metal, be it copper, lead, iron ore, you name it - outperformed silver by a big margin.
so maybe investors have simply become tired hearing about the explosion that never seems to happen. in which case there's really nothing to be baffled about ( incidentally though, public disinterest is of course also a bullish sign ) .
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