yoremopnhoj re: "Benny & the Fed"
your post:["Sliders argument continues to hang on 'Benny and the Fed's' doing the right thing. So far all I see is talk out of the Fed's about how tough they will fight inflation. Why is NG over 8 dollars with a glut of inventory? Why is oil over 60 with a glut of inventory? Why does the US stock markets go up despite bad news? The world is flush with paper currency and a limited number of places to put it, that's why. Under current Fed policy we are headed for both the Dow 50,000 and Gold at 50,000. Slider will be right only if the Fed's get serious about inflation, for now they are trying to talk it down."]
When the Fed prints money - they are inflating, counterfeiting/stealing and redistributing wealth.
On that -- we can all agree.
And inflation always leads to a massive misallocation of capital and much of it has seen it's way into commodities.
The most insidious part of the quantity theorist & monetarist Chicago School of economics is not the obvious transfer & redistribution of wealth; but the fact that those early in the chain get a windfall of capital in which to misallocate in any way they see fit.
And of late, they've seen fit to put their windfall into commodities.
How do you think Goldman Sachs is able to generate a 40% return on equity (the bulk of it from proprietary trading)? They've generated $125 Billion in revenue over the last decade -- triple the previous decade.
One of the biggest mistakes that the perma-bugs have made over the last three years of this cycle, is in fighting the trading battle like the British Army did during the American revolution.
Sinclair's "Hold Tight" methodology epitomizes what I call the "Red Coat" Trading Mentality.
A picture's worth a thousand words...
The perma-bugs think Bernanke is a boob and that the Dollar is just going to roll-over and die... so, they lock arms and march in lock-step to their own slaughter over and over and over again...as the Goldman's of the world churn & burn them.
That's why there's been 3 consecutive years of 100 point HUI index shakeouts... because perma-bugs like Sinclair have taken a "hold tight" attitude and have fought & traded this market like the old British Red Coats, instead of the hit & run guerrilla tatics of the rag-tag American Revolutionary Army.
The mistake of this latest shakeout -- the brutal May collapse in both gold and the HUI gold stock index; was in not honestly acknowledging that commodities had been run up to a speculative excess.
Warren Buffett with his headline short bet against the US Dollar and his massive buy of physical silver, was originally held up as a hero by the perma-bugs. But, then was turned on and shunned, because he closed out those positions and said that commodities had risen to a speculative excess.
John Hathaway of the Tocqueville Gold fund recently said the same thing.
Traders have to be honest with themselves.
It's not always a "you vs. them" battle. The most important battle you will ever fight, is the "you vs. you" battle.
A speculation by any other name -- is still a speculation.
Sadly, few saw it at the time -- for what it was.
Now once again gold & gold stocks have gotten a little pop, but so has the entire market.
The DOW was jammed up for the November elections and if the Republicans had maintained their majority... the big push in early 2007 would have been for Social Security reform & individual accounts...which would have redistributed billions of dollars into the hands of the investment banks.
What has happened now, is that Mr. & Mrs. Main St. USA have seen the DOW get run up to a "new record high" and now they're throwing money at fund managers and chasing the market..right on cue.
-- The Put:Call ratio is only 66 puts for every 100 calls and that extreme bullish level is now equal to the May top.
-- The Dow is now 1,000 points over it's 200 dma - which is an all-time record.
-- We've got an inverted yield curve.
-- The Dow Transports have failed to confirm.
-- The Housing & Refinance Bubbles have popped.
-- The ISM reading dropped below the critical 50 level.
And the reality of this massive debt & credit orgy are finally beginning to hit home.
James Cramer actually hit the nail on the head on his Wednesday Mad-Money show. He talked about mutual fund managers just throwing money willy-nilly at the market...the market that hedge fund managers had front run during the Novemember Election prop-job run up.
Those hedge funds are now setting up to pull the plug and suck their profits out...while handing off the bag to Mr. & Mrs. Main St. USA...AGAIN.
Rinse, Wash & Repeat.
That's why I like shorting the Nat Gas E&P stocks here.
There was a lot of rotation out of drillers and big oil's into the Nat Gas sector during this recent correction in crude oil.
They got a nice pop here of late from all of the cash thrown at Mutual Funds in an attempt to chase the new Dow highs and I think they'll be locking in these gains into the end of the year. Maybe they run the XNG up to 500 by the end of the year...but, it's when, not if... we see 380-400 again.
Record supply inventories, a slowing industrial sector, a mild El-Nino winter forecasted...and the leding economic indicators pointing to the likliehood of a U.S. recession.
I'll take the bet.
PS: Anyone else shorting the pump & dump -- paid promoter Uranium plays?
Here's two "POS" bones... FRG & URZ. |
