Wednesday Outlook: Commodities, Emerging Markets

<< Return to page 1 - Moral Hazard Be Damned










































The rumor continues to circulate that much of this Fed scheme went to help Bear Stearns (BSC). I’m sure Ace Greenberg thanks you for the bailout. But America, you just bought all their crap and they’ll count on the government as a backstop again someday. That’s the 'Moral Hazard' issue in a nutshell.

My opinions are conflicted since we have some short positions and gave back profits. Nevertheless I would much prefer to let markets work things out without manipulation by the government, particularly for the benefit of a few banker friends of the Fed who screwed up.

Someone please add our tab up since I don’t think anyone knows exactly how much money has been literally given away by central banks over the past few months. The Fed alone has injected $400 billion. The ECB has authorized $600 billion. Congress has tossed in another $150 billion and there are politicians wanting to do more. So we’re in the trillions. No wonder investors covet gold.

Yesterday was an epic short-killing rally and you just have to applaud the Fed’s timing just by viewing the McClellan Oscillator below. They struck when the market was oversold. But was this just another one day wonder? We shall soon see.



Have a pleasant evening.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in SH, SDS, MYY, MZZ, IWM, RWM, TWM, PSQ, QID, IEF, UDN, GLD, GDX, DBC, USO, DBA, DBB, EFA, EWZ and FXI.

Comments

[Krakatoa:]

Mr. Bernanke has shown most of his cards but Mr Bear Market has plenty good cards to kill this poker game...

2008 Mar 12 06:46 AM

[glideratio:]

true !! lol

2008 Mar 12 08:28 AM

[naturalsol:]

Where did you get the ECB 600 billion figure?

I read about some 20 billion packages and such...but I'm kinda hoping the Euro stays strong.

2008 Mar 12 09:17 AM

[PTAUAG:]

This trading Treasuries for junk is diluting the value of Treasuries, which the US Government must sell every month. The upward pressure on inflation by the nationalization of this junk will be felt quickly. Look for Grains, Fuels, and Gold to continue their march up. Since the U.S. middle class is now fearful of being unemployed wages will not keep up; look for a quickening Bankruptcy rate. Which means more home foreclosures, which means more Fed purchases of junk. So we descend to emerging market standard of living with each turn of the screw. I wonder if this isn't the goal?

2008 Mar 12 10:10 AM

[buyitcheap:]

What inflationary actions by what country in the 40s led to a wheelbarrow of paper money for a loaf of bread and a war? I'm long eggs and a few dairy cows and pre-1982 copper pennies. Anyone know where I can get a swiss franc denominated CD?

2008 Mar 12 02:37 PM

[User 148608:]

everbank.com offers Swiss franc CD's. Also yen accounts.

2008 Mar 12 07:05 PM

[Brian in Mo...:]

With all that New Money why not just buy Canada, we have plenty of Gold,Silver,Platinum even diamonds for drilling oh ya oil too...and The Snow is Still Free...2 feet just last weekend...
everbank.com has Canadian dollars too...and Kitco.com here in Montreal has Gold, Platinum and Palladium accounts...

2008 Mar 12 10:25 PM

[The Pilgrim:]

I've wanted to open an Everbank account for a while now - but I checked them out on the web for complaints and there are some which don't inspire confidence in their Customer Service, promptness or record keeping.

Any one a customer of Everbank?

What do you think - can they be dealt with long-distance without pulling out your hair?

Thanks in advance.

2008 Mar 13 05:06 PM