From: M
Sent: Thu, May 5, 2011 11:27:41 AM
Subject: Gold - Log
I'm not saying we get there, but we could easily drop to $1200 between now and the end of the year and still be in a bull market for gold.
So I'm holding tight, and not selling anything, even if we get some bullying as we are now seeing in silver.
But I fear I could experience some stomach churning in the coming months if the markets sell off - i.e. all correlations go to one.
M
From: C
Sent: Thu, May 5, 2011 11:34:51 AM
Subject: Re: Gold - Log
Indeed stomach churning possibility, already have the pepto out and ready... maybe should do a little short incase you are correct and the bullying continues?
From: H
Sent: Fri, May 6, 2011 1:43:31 AM
Subject: Re: Gold - Log
Many precious metals shares are acting as if it were already there.....
From: T
Sent: Fri, May 6, 2011 1:51:54 AM
Subject: Re: Gold - Log
We know it is just talk from the Fed, but there must be some internal discussion about the loss of credibility.
zerohedge.com
I fully expect the Fed to take advantage of the end of QE2 to smash gold, silver, oil, and whatever else they can. Gold might do a repeat of 2008. And, with the debate on the debt ceiling delayed until August, I would expect them to push up the Dollar to buffer what we know will happen.
The RUT is truly absurd at this level.
t
From: S
Sent: Fri, May 6, 2011 2:29:20 AM
Subject: Re: Gold - Log
How does 32 on the SLV grab everyone? Too obvious?
From: W
Sent: Fri, May 6, 2011 2:36:08 AM
Subject: RE: Gold - Log
32 is betw 50 and 200 day ma as you indicate.. too much of a no man’s land to be the support..
I think the first stab is around 30 and I wouldn’t buy it unless it bounced off the 200 day ma. (I use exponential ma)
If 30 doesn’t hold, next move is to 20.
And if we’re lucky, this is our retirement trade.
From: T
Sent: Fri, May 6, 2011 2:43:57 AM
Subject: Re: Gold - Log
27-28 on silver and 1255 on gold.
t
From: bart - naf <bart.naf@gmail.com>
Sent: Fri, May 6, 2011 3:17:34 AM
Subject: RE: Gold - Log
May help - attached and at nowandfutures.com
First target 33, then 26-28, watching the ratio for clues... and WTFDIK.
From: H
Sent: Fri, May 6, 2011 3:56:05 AM
Subject: Re: Gold - Log
To be sure, we have heard a lot of hawkish talk prior to the April meeting - from Plosser, Fisher, Hoenig, even Bullard. And what happened? The FOMC statement that came out of the April meeting was by far the most DOVISH one imaginable.
So I would take none of this talk seriously, especially as the US economy is probably much weaker than is generally held. House prices just fell to new lows. weekly claims are almost back to the 500K rate, Qu. 1 GDP was much weaker than anyone thought possible a mere few months ago. Bank lending remains completely in the doldrums (instead the banks buy only t-bonds ).
Now the stock market is beginning to look soggy as well. Trichet killöed the euro rally today by sounding ext5remely dovish as well. Mervyn King explained on Tuesday why - in spite of CPI inflation in the UK coming close to the 5% level recently - the BoE has no choice but to hold rates at 0.5% and continues with QE. His words: 'there is just too much debt, raising rates would bring about a catastrophe'.
So whatever they say, forget about higher rates. It isn't going to happen until and unless the market FORCES them.
I used SLV puts and ZSL calls to hedge my pm stock positions, but as of today have sold the vast bulk of them (I sold about half yesterday - could have done a lot better by waiting one more day obviously, but I have simply followed a pre-conceived plan). Out of the money front month ZSL calls went to implied volatilities near 145 today, and there is a good chance they will not go into the money at all. Over the past two weeks they could be bought for next to nothing, although IV was high even then. In any case, it appears to me that after such a big move lower in such a short time, the best strategy is to wait for a bounce to reload. Admittedly mostly just a gut feeling, but silver went from almost $50 to $34 in just four days, so some sort of retracement bounce should be in the offing soon - judging from how silver corrections have played out in the past. After all, we're not in a big financial crisis right now, it's just a big tree shake for the silver bubble, not a global margin call on everything.
Not yet, anyway (I'm adding this comment because I think we WILL eventually see another crisis in the context of the euro area breaking apart. That story is NOT over).
From: S
Sent: Fri, May 6, 2011 4:53:42 AM
Subject: Re: Gold - Log
Below is a concise description of the post-QE2 deflationary case as articulated by Dr Lacy Hunt of Van Hoisington (I nicked it from message board)
Hunt has long forecast a deflationary outcome (e.g. safehaven.com and evidently he hasn't changed his tune
I'm guessing HB and Dr Jim at a minimum are generally on board with these ideas, but I'll let you speak for yourselves if you choose to --
Ending QE2
The historical record on massive Federal Reserve intervention is minimal but indicates that as QE2 terminates at its scheduled end on June 30th, the inflation/risk trade will also fade. Accordingly investors should gradually move into Treasury securities and other high-grade risk adverse investments. This will release funds for the mortgage market and credit worthy state and local governments. Upward pressure on commodity prices will abate. This will begin to mitigate the downward pressure on real wage income and consumer confidence. The lower commodity prices will also serve to unwind the corporate margin squeeze that resulted from the higher commodity costs.
While the economy will slow initially, the drop in inflation over time should lift real income and serve to stabilize the economy. The dollar should firm, encouraging foreign investors to place additional funds in U.S. markets. Taken together, these factors should give the economy the opportunity to stand on its own, rather than rely on massive governmental interventions whose potentially negative and unintended consequences are unknown.
The evidence of the past three years seems clear in that monetary and fiscal policy have been unable to improve the average American's standard of living. Time will be required to reestablish balance sheets to more normal levels, and in the interim disinflationary/deflationary tendencies will be ascendant. This environment is favorable for holders of long dated Treasuries. Positioning for an inflation boom will prove to be disappointing.
From: H
Sent: Fri, May 6, 2011 4:53:51 AM
Subject: Re: Gold - Log
In fact, I am considering reversing myself in these options for a short term trade, i.e., betting on a quick bounce. In the monthly cycle in SLV, e.g. the 37 May call went from $1.75 to 9 cents today. That may be worth a punt, because the risk is minimal, it's very liquid, and you get a big bang for your buck if silver bounces by 2 or 3 bucks. It's the mirror image of the puts now - a few days ago, you could buy the 34 put for a few cents, and now it stands at $1.10. The puts are all expensive now, priced for armageddon, but armageddon has already happened.
Of course this is a bit of a gamble, but not a completely unreasonable one. One can increase the odds by having the finger on the trigger and watching the market closely for signs of stabilization. If it fails to stabilize and plunges even lower, all the better, you can use a lower strike for the same purpose and potentially have even bigger bang for your buck.
I like low risk/high expectation trades, and the current volatility in silver offers some opportunities in both directions. These options are lottery tickets, but they are actually cheaper than lottery tickets and offer a far better chance for success.
You must however discount these ramblings by the fact that I have the flu and a splitting head-ache for the past few days, so I may not be thinking as clearly as normally.
In principle I agree that the end of QE2 will bring deflationary pressures back. It can not be otherwise, as the inflationary expansion of the money supply over the past 25 months was entirely due to the Fed's pumping efforts. This means lower prices for 'risk assets' and a rally in treasuries is likely in the offing when QE 2 ends - as there is no private sector credit growth in sight. This would, over time, have the beneficiary effects Hunt refers to, but I think he is wrong in completely discounting the Bernanke gang's views as if they didn't exist.
While the Fed is under fire and faces political headwinds, experience so far has shown that as soon as the stock market declines, the criticism of loose monetary policy becomes a lot more subdued and everybody is soon crying for more monetary heroin. Bernanke, Yellen and Dudley are the most important figures at the Fed's board of governors. Barney Frank actually wants to take the FOMC vote of the regional Fed presidents away, because they come from the private sector and are not political appointees. In other words, this bastard is trying to use the political pressure the Fed is under to remove the last vestiges of monetary sanity from it. If he succeeds, then there won't be any Hoenig or Plosser or Fisher any longer who could potentially throw a spanner into the inflationary works.
Even so, the chairman usually has the last word. We have seen it in April. Hoenig had the stones to dissent, but he's retiring in October, so he didn't risk anything by dissenting. The other internal critics talk the talk, but they don't walk the walk. So we must consider the views of Bernanke, Yellen and Dudley. Bernanke's views I can tell you: he is deadly afraid of deflation. He thinks that if the Fed had only printed enough, or if the BoJ had only printed enough, the Great Depression and Japan's slo-mo depression could have been avoided. He won't even consider the beneficial effects of deflation Hunt mentions. To him it's all about 'aggregate demand' that must be increased by hook or by crook. How does a central bank get people to spend? Easy, according to Bernanke, just make sure they believe that their money will be worth less tomorrow than today, and they will go out and spend. Production will, in Bernake's world, take care of itself. He believes that there is a magically self-replicating homegenous blob 'K' (for capital) somewhere out there that will swing into action all by itself if only people spend enough. He also seems convinced that in the event prices and wages were to actually rise so much that the government's doctored 'CPI' registers something, he can with a flip of the correct lever quickly bring prices to heel again. The man is convinced that the Fed has a perfect script for every convceivable future outcome.
Imo we will see them eventually monetize stocks, corporate bonds, foreign government bonds, etc. - all the stuff Bernanke listed in his famous 'making sure 'it' doesn't happen here' speech. But before we get to that point, we'll have another nice big deflation scare.
From: d
Sent: Fri, May 6, 2011 5:32:26 AM
Subject: Re: Gold - Log
Note FLAT also got more interest, as it should.
From: H
Sent: Fri, May 6, 2011 5:33:06 AM
Subject: Re: Gold - Log
something everybody should be aware of - the shortest term interest rates are collapsing again.
Yes - one must remember here, the 'inverted yield curve' warning of oncoming recessions does no longer work in a private sector debt-deflation world. Credit demand is so weak that the effective FF rate never once peeked above its upper bound, so there is simply no creation of circulation credit aside from lending to the government and thus also no pressure on short term rates to go higher. So one must instead watch whether the curve widens or flattens. Whenever it widens, 'risk assets' are the play to be in, but once it flattens one must immediately go on recession watch again. Note here that the cylical recession during secular debt deflation periods are not getting preannounced much. Stocks do generally not 'lead' in these periods, they become a coincident indicator of the economy. And when recession phases begin , it is usually as though someone had thrown a light switch. All of a sudden, orders plunge and production plans must be curtailed again. This is why stocks don't lead - there are not enough warning signs. Look e.g. at Germany - it has been booming, but has just suffered a big 'surprise' decline (-4% month-on-month) in manufacturing orders. There was a bit of a warning from the export data I believe, but not much else. Mind, I'm not saying a recession has begun in Germany - there is no evidence yet to that effect. I'm just using this as an example illustrating how it will look when the next recession begins - it will be a big surprise.
From: S
Sent: Fri, May 6, 2011 7:50:51 AM
Subject: Re: Gold - Log
H, thanks for taking the time to chime in on the Hunt thing -- the internal contradictions were (and still are quite frankly) bothering me, but now I see his deflation scenario more as a description of a comparatively brief static condition that, as you point out, lacks reference to further Fed responses to said deflationary conditions -- as such, Hunt seems to assume that "QE2 is it, no more easing", and while that would be fascinating to see, I agree it's much more likely if deflation were taking hold that we would see QE3, QE4, etc., i.e. additional rounds of the bubble blowing game
Having said that, it returns me to previous discussions here of how long, and how many times, can the Fed "bubblefy" things in this manner before it blows itself up (and everybody else)
I suspect the answer to that question is similar to the stock trading truism that things can (and will) go on longer and also get bigger than I ever thought they could
From: M
Sent: Fri, May 6, 2011 7:52:22 AM
Subject: Re: Gold - Log
This might be a better predictor of the stock market than the shape of the yield curve in our current environment.
M
From David Rosenberg of Gluskin Sheff:
The ISM manufacturing index, remember, is a diffusion index of business sentiment. So at the peaks, all the good news is in., and vice versa for the troughs.
It is interesting that when the ISM is at 30, the stock market goes up 22% in the ensuing year, and when it gets into a 30-39 range, the price advance in the S&P 500 is north of 29%. Orevoer, as you can see in the table, when the ISM peaks north of 60, where it is today, the average gain in the equity market iin the ensuing year is 2%, the median performance is sub-3%.
So after seeing a doubling off the 30’ish lows a few years ago, the historical record would suggest that we should be bracing for sub-normal returns in the coming year.
To be forwarned is to be forearmed.
TABLE 1: ISM MANUFACTURING INDEX: A CONTRARY SIGNAL
ISM Manufacturing Index # of months at One Year Later
specified range Average Median
<30 1 22.3% N/A
30 – 39 43 28.7% 30.6%
40 – 49 183 9.2% 12.3%
50 – 59 390 7.7% 8.7%
> 60 119 2.0% 2.9% |
