Thursday Outlook: Commodities, Global Markets 36 comments
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<< Return to page 1 - Another Asset Bubble
If after hours trading is any indication, then we should be heading much higher tomorrow. The bulls are taking over once again driving market prices higher in everything everywhere. All this is due to low interest rates forcing investors on the sidelines to lose their patience and make for better returns in riskier assets. This is the logical outcome of this much liquidity with a lot of manipulation and BS stirred in. It is what it is. That’s all we can say since we’re back in bubble-land once again. The price will be high but that’s all down the road since putting things off seems easier. While officials talk tough, it’s also much easier to inflate.
Zero Hedge glommed on to an interesting Goldman Sachs (GS) document leaked to them. A portion of their summary is as follows:
“What is interesting is that while Goldman makes token concessions about certain aspects of market topology, it is virtually adamant in its “do not touch” stance on precisely those components in which it is becoming a practical monopoly power.” Continue reading….
You have to hand it to Goldman—what you hand them is up to you.
Let’s see what happens and follow our intraday comments on twitter.
Disclaimer: Among other issues the ETF Digest maintains positions in: VTI, XLF, DVY, IEF, TLT, UDN, GLD, DGP, DBC, EFA, EEM and EWC.
The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com.
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This article has 36 comments:
yet the real economy, minus all the stimulus fudging the figures, is really poor
Technically the US dollar could end up at the 70 level, where it was bumping along before the crash. That would tend to fuel lots more gains before its all said and done. But nothing goes straight up or down.
Man, check out Australia. Low unemployment, commodity supplier to China, rising interest rates, currency and stock market shooting through the roof.
I remain skeptical overall. But that's me. I miss lots of upside and downside. With the US, Europe, and Japan mired with little or no growth, that, fundamentally, is not supportive of higher prices.
And I hope sooner, because the later it happens, the more it will hurt.
Christmas present?
Oh well, I hate these kinds of situations. They give me a rash.
But wait. Under the surface, though, all is not well. David points out, correctly I believe, that there are multiple asset bubbles forming across the capital markets. The issue is not that asset prices have come too far too fast (depending on what time horizon you're talking about, maybe ten years instead of six months, equities have gone nowhere, too slow). The issue that David lays out is twofold. First, governments across the globe have printed money and virtually dumped it for free into the banking system. The money has been plonked into various assets. Second, the risk-free rate of return is still probably negative in real terms. Meaning, when it comes to taking risk, the market has you in a dark room, Lou Cabrazi standing behind your chair, and in a quiet mumble, is now making you an offer you cannot refuse. Why? Because if you are guaranteed to take losses by parking money into risk-free assets (3% interest on a US Treasury, after taxes, is certainly less than the 3% average inflation rate observed over the past 100 years) you will rotate into risky assets. You have no choice.
Here is the problem with an offer you can't refuse. The price has nothing to do with what a rational buyer, having all knowledge of the facts, would pay in an arm's length transaction. And this gets really interesting when not only are you faced with an offer you can't refuse, and your pockets are brimming with freshly minted cash that doesn't belong to you but you get to spend anyway? What sort of a price might you be willing to pay? And has it anything to do with what a rational investor might pay?
We might not like it, but the market is going up, and arguing with the market is unwise. I share David's thesis, but it doesn't follow that the time to initiate short positions is upon us. To the contrary, as long as the market surmounts technical resistance in the face of skepticism and disbelief on the part of investors, I'm happy to allocate capital to risky assets. But when the tide turns, the fundamental imbalances in the capital markets are so very profound, I shudder to consider how low markets could drop.
Weeks before this earning season kicked-off there were numerous articles about how thing would be "better than expected." Sure enough, report after report is better than expected and the stocks jump.
Now then... If you are predicting things are going to be better than expected, how can it be "better than expected"? You are already saying that you are expecting a specific level... You are expecting it.... Same with all of these reports...
The phrase "better than expected" is just the newest Catch 22 in this economic sham run by Ben and Tim.
I guess we should go there once a week until the 30 day price guarantee expires.
We also were looking for office chairs but none of the big box stores carried them any longer--Macy's, J.C. Penny, Sears and so forth. But my wife noticed the incredible amount of merchandise, particularly clothing, that stores maintained. Further, there were very few people manning the cash registers.
This is view from the Fry's in a large mall in Manchester, NH. Hardly very scientific.
Come to think of it... Perhaps the marker will work on both..
On Oct 08 09:41 AM Alex Trias wrote:
> A bunch of index ETFs are filling their trading gaps from last year.
> These gaps represent strong resistance points, but the bulls appear
> on the verge of overcoming the bears. If the top range of the gap////////////// SNIP//////////////
Estimated "break even" levels: 3,000 to 6,000
Still waiting...
docs.google.com/View?i...
Not sure what he was talking about.
thanks for your work...
On Oct 08 09:42 AM David Fry wrote:
> I should have mentioned we returned an item to Best Buy and noticed
> that the TV we had purchased at the same time a few days earlier
> had its heavily discounted price slashed another $200 which the store
> credited us.
>
> I guess we should go there once a week until the 30 day price guarantee
> expires.
>
> We also were looking for office chairs but none of the big box stores
> carried them any longer--Macy's, J.C. Penny, Sears and so forth.
> But my wife noticed the incredible amount of merchandise, particularly
> clothing, that stores maintained. Further, there were very few people
> manning the cash registers.
>
> This is view from the Fry's in a large mall in Manchester, NH. Hardly
> very scientific.
On Oct 08 10:37 AM David Fry wrote:
> Gee, Fat Cat, we got chairs finally at Staples for a lot more. You
> available for ongoing shopping consultancy?
Well stated. I hadn't given that much thought.
Remember, this is not a GS or other operation. These are the little guys that serve small business in their communities who aren't doing so today.
On Oct 08 12:31 PM David Fry wrote:
> My "community" banker friends are enjoying the steep yield curve
> paying zero for funds and buying Treasurys and mortgaged backed qualified
> securities. They're not lending since they're buried in crap. The
> FDIC is on their case so they're frozen in making loans since they're
> trying to work out of poor loans.
>
> Remember, this is not a GS or other operation. These are the little
> guys that serve small business in their communities who aren't doing
> so today.
However, Hong Kong (EWH) and China (FXI) have been consolidating the past few months and I'm thinking it may be their turn to run. So I'm in. Also read about some unusual call activity in EWA. Got me to check the charts.
Remain long core positions in GLD and SLV. No positions in US stocks.
every time I go to carrefour, which is a giant chain in EMEA I have to wait in long lines, shopping carts are stacked, the buying is relentless.
I am long SRS options, which I am loosing crap load on, today I picked up CEE.TO to play the gold breakout and the collapsing dollar. I am scared that whatever little savings I have will be wiped with vicious inflation. I am sitting in 95% cash with the cash being distributed 70% USD and 30% euro.
David,
Do you think it is time to go long DBC , DBA and MOO?
of all asset classes, food seem to be the cheapest.
> I have to jump in here with the shopping. My daughter bought high
> end designer bedding on clearance at Macy's. Cost: about $150.
> On the receipt, it says her savings were $1200. Uh oh.
"Has the Evolution of this Market Structure Brought Benefits to the Investing Community?"
And then read the following header on slide 8:
"As a Result of this Instensely Competetive Market Structure, The Retail Trading Community is More Empowered than Ever Before"
I knew this was a steaming crock of G.S. - B.S.
Of course, they were presenting this to the S.E.C.; kind of like Vito buying doughnuts and coffee for the Cops he has on in his pocket and telling them which drug dealers and ho's need to be left alone.
Dividends alone proves that it is not gambling. Also, unless you're company goes bankrupt and as long as you don't need the money immediately, you can wait to get your money back as your company recovers since you only have paper losses.
Maybe you are not that good of an investor, don't invest at all or just bad at timing your investments, either way, you are wrong about the market being as casino.
Socialists like M. Moore may try and get you to believe this, but guess what, in the end capitalism works, so profit with it by being in the market. You say AA is good example. Well let's look at AA, and I'm not a huge fan of AA, but I will discuss since you mentioned it. AA is still way down from just a couple of years ago. Yes, if revenues do not improve this time next year, I would agree with you, but right now, we are setting up to grow off of a low base.
Have fun keeping your money under the mattress at 0%.
On Oct 08 06:03 AM MJJP wrote:
> Companies showing profits including Alcoa are doing so because they
> have been slashing and burning not because the businesss climate
> has improved. As far as the stock market is concerned it does not
> reflect reality and is being moved be forces with deep pockets with
> a responsibility to show positive results. I am talking mainly the
> mutual fund and investment managers.Scott Trade and others exist
> because of day traders. They make their money when people trade.
> They encourage this activity. This is a trading market and has always
> been.The stock market can be considered a legal casino. Don't believe
> me? Go to the message boards on Yahoo finance and read the supposed
> buys and sells. Why do business shows like the CNBC and MSNBC exist
> on a daily basis? It's entertainment. Stocks going up or down a few
> cents or a percentage or two do so because of big players not necessarily
> because anything has changed and any percieved changes are usually
> not significant. The average person should not pay any attention
> to it.