Bought some bear fund today RYTPX, Rydex tempest, -200% S&P.
Note that there has just been a 3 way meeting of Japan, the EU and US central bankers, with likely cooperation from everybody else except maybe Iceland. There is also a new, very serious Treasury secretary, with a sort of Paul Volker vibe.
Here's what this means -
1) The world economy has pretty much recovered from the dot-com bust, the telecom / wireless bust, and the 9/11 attacks.
2) The accomodative interest rate policies and flood of liquidity have WORKED - 19 of the 20 largest world economies are GROWING, and none are in recession. In fact, something like 47 of the top 50 economies are growing.
3) The flood of liquidity may have resulted in a number of asset price bubbles around the world - Aussie houses, US houses, mining stocks, etc. The flood of liquidity recently helped cause a PARABOLIC price run up in metal prices way beyond the range of economic value. This bad and dangerous, and could really get inflation going.
4) So the decision is to reduce excess world liquidity before additional damage occures. This will mean much of the carry trade going away, lower asset prices, including stock prices.
It won't matter if earnings are better, stock prices will come down.
I expect with many carry trades being unwound, liquidity is being removed.
>>>>Remember the flood of liquidity in 1999 to counter possible Y2K problems or terrorist attack effects ? In 2000, that liquidity started to be removed, the market peaked in March, got slammed in April, and WENT DOWN for a LONG time afterwards.
The sky is not falling, it's just a BEAR MARKET. It is a deliberate bear market, and when the pain gets too bad, the central banks will loosen a bit for a week or so, then be back at drying up liquidity....
TJ said : "
We are witnessing nothing less than the beginnings of cataclysmic destruction of the middle class, as the underpinnings of secure jobs, rising housing, and cheap financing crumble, to expose productivity for the fiction that it is, ridicule housing for the wealth that it isn’t, and remove the confusion between fiat money and genuine capital"
Way too apocalyptic. The FED and other central banks are just taking away the punch bowl from the party, especially since some of the ladies (metals) have decided that it is hot and the y need to take their tops off....while the frat boys (hedge funds) are yelling "take it off !"....yes, one of those college beach parties gone bad.
Note the central banks are taking away the punch bowl, not adding more rum (prining more money).
>>>>>Let's stop some of our panic - sell a bunch of stuff NOW, sell more tommorow, then sit on cash until better prices, buy only a little, sit on cash and wait some more...
That takes some discipline. I don't like discipline, by the way, I like ice cream much better.
My Energy trust buys of Monday were clipped today. If they don't hold up better, I will trim the positions back.
Sell in May and go away is looking really good ;-)
Now for the good news -
Lower assets prices in a year or so.
Remember the nice runs in Newmont, Vermillion, etc. ?
Want to do them again ? (maybe not a long a run this time) |
