Hello riskmgmt, quantitative easing, the morally corrupt act where central bank, especially a privately-held central bank, printer of ‘fiat money’ that is not a store of wealth, orders up a pile of fiat money and allows its cronies to spend it, is inherently bullish for all assets that are denominated in the said fiat money, and is also wonderful for businesses that has margin power by way over pricing and means over costing.
We will go through bullish times, just as we did 2003-2007, where some things and companies rise in valuation, where the major indices may even reach and then breach high watermarks, even as the money in which the bull is denominated in wilts in purchasing power.
Important issue: which assets / index will truly benefit? Which merely tag along? And falling behind?
I am guessing gold shares, gold, platinum, real estate, … and general equities … and standard of living, from one happy end of the spectrum to the other sorry terminus.
In the mean time, some watch n brief back n forth (w & b b & f)just in in-tray:
player #1 On Wed, May 20, 2009:
market had a bit of a reversal today, while golds closed just off their highs in most cases.
player #2: yes, it might be - but it's also just one day, so difficult to read too much into it. fact is, the HUI closed at a new high for the move, and if gold rallies above the Gann resistance line at 941, it will go to new highs as well.
i shorted more banks today....i've been doing that for a few days now, adding bit by bit. these jokers have issued $56 bn. in equity since the 'stress test' joke.
i'm now both long gold stocks and short the market, so the only thing that would be worrisome for me would be a market rally and falling gold stocks at the same time (a la Monday)...every other combination i can live with. days like today are of course extra nice.
player #1: On Wed, May 20, 2009 at 11:28 PM, J G <data2net@swbell.net> wrote:
i can quite easily visualize your position.
having learned finally, i decided for this round of the bubble building program, the best way to fight the fed, was to be in alignment with their actions. gold and ultimately commodities was the answer. i will not be short this market even when it is falling. my eye is on the bonds, which are going to be the key in the lock. i'm trying iow to get out of my habitual habit of positioning for my own ultimate stress test, and become more aligned with the force <g>.
gold and sometime, tbt, will be or is the plan... with side skirmishes as opportunity presents itself.
63% of the time david slew goliath by not playing ball head to head. 63% of the time david was killed by goliath when he tried to copy goliath to fight him.
classic near history, george washington was winning the war with his bands of gorilla's who he detested, and almost lost the war when he took the british on in "their" own terms.
yes.. a day does not a change make. but it was interesting i thought. wow, this is going to be a wild week. btw...........volumes in the gold shares exploded by 1/2 or more of the ten day moving averages.
player #2: the thing is, a period of even more sharply rising real estate loan delinquencies is just ahead (both commercial RE and the entire Alt-A and option ARMs enchildada) and i think the market is going to begin to react to that, regardless of the Fed. of course it's possible that it only reacts at a later stage...but numerous cycles are due, and the rally has traveled quite a distance already.
player #1: On Thu, May 21, 2009 at 12:02 AM - very true. but as you can see in the bond market......................wonder of wonders.................. everyone is playing ball, yet again, with the feds of this world. truely stunning. by the same token, now that we truely know who sleeps together, is it any wonder????????????
the street has had the feds at their back easily since 1998. would you give up on a sure horse?
bottom line................................. the players are playing ball or want to. you can smell it. we've seen it. we know it.
i have finally learned who is in charge.
and i guarantee you, stuffing the ftc into the fed made a whole lot of wall streeters smile. it's a "gimmie" in street parlence.
you and i both know all of this will fail. but that's not the street's trade right now. and they are desperate mother f***ers at the moment. perhaps more desperate than they have been in your trading career, and certainly in mine.
what say you?
player #2: actually, apart from what are really one day moves if you think about it, i think the bond market is doing its own thing...when stocks rise, it falls, and vice versa. the Fed's announcements are really secondary. remember the day when they first announced t-bond monetization- it was THE day to go SHORT bonds. and compare what move the bond market made when they first announced this - the biggest one day up move ever (and a major interim top at the same time) and the tepid reaction today...yes, it rallied a little bit, but imo it was poised to rally anyway.
there is a lot of excess liquidity out there now, this is true, but in depressions this excess liquidity tends to move into different places than stocks...if March was a durable low, then we have just had the one of the shortest time lags between the appearance of excess liquidity and a major market low ever. i can't believe that it is that easy.
on the other hand, i can very well envisage huge amounts of this liquidity flowing into gold and government bonds both.
player #1: well yes.. and indeed..................................you are asking THE salient question. why are these creatures of habit still buying these US pieces of shit paper? why? are they just that f***ing stupid? has 70 years since the dollar became key currency lulled everybody into a century old habit, leading them into the british abyss? i.e. they believe in the safe haven, when in fact the printing itself clearly shows, it is not, let alone default?
i suppose, the gambit however this time, is that the usa debt is part of truely a world market it clearly no longer dominates. just as it was when the british clearly no longer were going to dominate their empire when in fact the sun did start to f***ing set over victoria's britannia. and time is the only question. which leads back to the original tbt discussion: ergo patience. when the time comes, the boa will bite it and eat it whole! but doesn't mind waiting as long as it takes to get stuffed!!! LOL.
what do you think?
and thank you for your thoughts as always.
player #2: you must consider the factor of time in this equation. now, the senior currency always tends to strengthen in major global busts, simply because most of the debt is denominated in it - and there is far more debt out there than there is 'money' to pay it with. even the most generous measure of the US dollar money stock (MZM) is only about 1/6th of the total dollar denominated debt, and the outstanding government debt is in turn only about 1/5th of that total stock of debt. and that is US debt only - others have huge dollar liabilities too (for instance, the entire Euro-area banking system).
so whenever crisis erupts, there are choices that must be made w.r.t where to flee. and in this case, money flees into both gold and the debt of the most credit worthy debtors. not ALL of it CAN go into gold, since 1. there is not enough of it and of what there is, only very little is available, and 2. some investors are simply not allowed by their investment statutes to overweight gold.
the calculus is based on historical episodes during which government debt temporarily spiked to very high levels without bankrupting the government (WW1, WW2, Japan, Italy recently) - so everyone still assumes that this will continue to hold true. at some point they will realize that it's not true anymore, but we are not yet there. by that time you could see daily moves in gold prices that are larger than its current price. clearly we are still very far from that.
player #1: nicely put. how much can the sponge absorb if based in x vehicle.
but i would suggest, and i do not disagree with your points at all, that still, there is a belief basis vs. a no alternative basis for the current state of affairs. and we have also not addressed the classic rushing home of assets/values that we saw in post 1929 either, though we are slowly getting there vis a via the initial rush we saw in 2007, but now tapered off for the time being, hence the dollar rise, as all must cash out dollar dominated contracts, in order to return home (yes.. weird inverted shit thought).
again, i do not think you have addressed the mechanics of this if only one of the "end" games here.
i.e. your view is not complete.
and if i had one, i'd try to fill it. but w/o one, the idea that failure is the key in the lock, still holds true re the original point of what we are talking about................and thereby...................the foundation in the end of all that we are undertaking at this moment in time.
hence........... crucial from a trading point of view, if not asset protection in regard to all things considered either cash or taxable or both.
Yes?????
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