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Brian Kelly

 
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  • The Silver Correction Is Over, Next Stop $62 [View article]
    So it's looks like was wrong about the correction being over. In my view this is still just a correction and silver will head higher. I am still long and will sell if/when real interest rates are positive.
    May 3 03:29 PM | 5 Likes Like |Link to Comment
  • Equity Risk Premium Levels Suggest March Lows Will Hold [View article]
    Not only the one time gains from banks, but the elimination of GM as a component in the S&P 500 has had a major impact on aggregate earnings.

    Of course, there is never one indicator that can paint the whole picture, but I'll take any help I can get!


    On Jul 07 06:11 AM Moon Kil Woong wrote:

    > Interesting, but do you think the massive one time accounting gains
    > the banks and financial institutions reported are real and should
    > be factored into such a study? Personally, I don't think so. Of course
    > reversing them out is such a pain. That's why most chartists tend
    > to revert to oversimplification destroying the basis for their charting
    > all together.
    >
    > There are probably tons of inconsistancies that should be taken into
    > account with such studies and I have yet to see very many charts
    > where the analyst has attempted to rectify the varagries between
    > different time periods. They tend to make the same argument all the
    > time, "It all cancels each other out." Somehow I don't think that
    > passes muster in class, so why should it get a pass in the real world?
    Jul 23 06:04 PM | Likes Like |Link to Comment
  • The Implications of Russia's Declining U.S. Debt Purchases [View article]
    Agreed that Russia's purchases of US debt is a drop in the bucket, but the speed at which they jumped to fourth place made them a country to watch.With the amount debt the US needs to sell, Tim Geithner can us all the help he can get!


    On Jul 20 06:04 AM TradingHelpDesk wrote:

    > Excellent article thank you. Russia buying of treasuries is an issue
    > but a drop in the ocean compared to China, Japan and the Gulf / Saudi
    > states isn't it?
    Jul 23 06:01 PM | Likes Like |Link to Comment
  • Another Compelling Case for Higher Equities [View article]
    Kup,

    The fact that the indicator (CFNAI) is still increasing does bode well for a sustainable rally in $SPY, but of course one indicator cannot tell the whole story.

    The massive amount of liquidity the Fed has pumped into the system has found its way to the equity market.


    On Jul 23 10:53 AM Kup wrote:

    > The S&P was higher at the 12 month mark over the 6 month mark
    > in only 2 of the 6 periods of that chart, not sure how that translates
    > to an assumption of 6 months more of a sustainable rally. Is it
    > solely based on the fact the indicator is still increasing?
    Jul 23 05:55 PM | 1 Like Like |Link to Comment
  • The Curious Case of Missing Intervention [View article]
    Joseph

    You make a very good point on the need for a coordinated effort and the need for China and GCC to be a part of that effort. And Bruce, I think your point about the SNB attempt to weaken the Franc is spot on.

    I have been skeptical of the SNB's real motivation - it seems as though they are just trying to talk the Franc down or at least keep it stable. It is not in the interest of the Swiss banking system to have a weak and unstable currency.

    I wonder if either of you have thoughts on the motivation and ultimate outcome of the Swiss "intervention"?
    May 6 08:58 AM | Likes Like |Link to Comment
  • Velocity of Money vs. M1 Multiplier: Mixed Signals [View article]

    Thanks -- the raw data is from the Federal Reserve and the Bureau of Economic Analysis. The multipliers are calculations that I produced.

    On May 04 12:27 PM Henrique Simoes wrote:

    > Fantastic article Brian.
    >
    > Where do you get the data?
    >
    > Thanks
    May 4 12:36 PM | Likes Like |Link to Comment
  • 3 Critical Tests for the IMF [View article]
    I think our points are similar. Regardless if the bonds are IMF bonds or corporate bonds priced in SDRs, if the market accepts them then I would call that a successful test.


    On Apr 07 08:01 PM elh nyc wrote:

    > I am not sure you have the IMF "bond" issue explained correctly.
    > There are issues being discussed about IMF "bonds" as in "issues
    > denominated in SDRs" and the traditional IMF lending as you mention
    > with their FCL package to Mexico. These are two separate issues.
    >
    >
    > In order for the IMF to "become the world's central bank", the proposal
    > was to have its "currency" SDRs become a "global" currency. It is
    > really not relevant whether the issuer of SDR-denominated bonds are
    > the IMF, it just requires that SDRs become commonly acceptable capital
    > markets instruments--liquid markets where people, companies and governments
    > can borrow and save. Next time Siemens wants to issue 5 year debt,
    > what odds do you give it that they choose SDRs instead of Euros?
    > How about California Water Authority 20 years? SDRs or USD?
    >
    > SDRs are currently a mixture of USD, GBP, Yen and Euro. The Chinese
    > were pushing for use of the SDR. Were they thinking the Yuan would
    > be an appropriate fifth portion? With a closed capital account?
    >
    >
    > The IMF is far away from being a global central bank. It didn't
    > even get firm commitments for the increases in capital for next year--only
    > "promises to get the commitments in January 2010" by which time the
    > current $215 billion will be gone.
    >
    > The G20 should take responsibility for the things it has done by
    > enumerating each additional protectionist measure put into place
    > since the initial meeting last year when they promised not to implement
    > any, instead of writing empty self congratulatory communiques. When
    > progress is made, fine. I see economic deterioration and denial.
    >
    >
    Apr 9 07:36 AM | Likes Like |Link to Comment
  • Why IMF Gold Sales Won't Affect the Gold Market [View article]

    According to the IMF website they hold 103.4 million ounces

    On Apr 03 10:24 AM Darbyred wrote:

    > How much gold does the IMF physically possess or control?
    > I mistakenly thought the last big sale pretty much emptied IMF's
    > coffers.
    Apr 3 11:22 AM | 1 Like Like |Link to Comment
  • TALF Creates a New Class of Toxic CMBS Assets [View article]
    Fishhooks,

    As I understand your position, it is similar to the logic the government is using, i.e., the perception that money is available to fund AAA asset purchases has tightened that space and that action should lead to other tranches tightening as well.

    In that light, it is a technical issue as opposed to a toxic issue, which is exactly the bank's logic behind not marking down assets. They claim a liquidity constrained market is not a market. But I think we are really talking semantics--if I can't sell an asset when I want/need to it is toxic to me.


    On Mar 31 12:02 PM Fishooks wrote:

    > I'd take your observation and argue the opposite position. Whether
    > or not you agree with re-instituting leverage into the system through
    > the legacy-TALF (albeit without the pesky margin calls that banks
    > used to enforce), the initial reaction displays the marketplace's
    > view of the difference between liquidity-strained and toxic.
    > BBB rated tranches with ~5% credit enhancement were and are fundamentally
    > troubled given the poor underwriting characteristics in combination
    > with declining real estate values (as 'Convexity' points out). Having
    > more $$$ in the system doesn't change the opinion cashflow/terminal
    > principal value.
    > Even though the tightening in AAA assets since PPIP/Legacy TALF were
    > announced is nowhere near enough to signal a turn in fortune, it
    > does display that the market's price point at this part of the capital
    > structure (30% attachment point) is significantly impacted by the
    > availability of $$$ (or at least the perception of the availability
    > of $$$) to own the securities. Thus, it could be appropriately argued
    > that it's more of a technical trading issue than a toxic asset issue.
    > By that logic, at least 70% of the CMBS universe on a notional basis
    > (much more on a market value basis, no matter what you perceive market
    > value to be) is in the midst of a technical issue not a fundamentally
    > toxic one.
    Mar 31 12:32 PM | 1 Like Like |Link to Comment
  • TALF Creates a New Class of Toxic CMBS Assets [View article]
    I also think that the T-bill auctions will be a key to watch. Since the Fed is only buying 2-30 yr maturities the same disparity could occur if investors only want what the government is buying. I am not suggesting that T-bills are junk or toxic, just that it may take a little extra yield to entice buyers.


    On Mar 31 05:02 AM Moon Kil Woong wrote:

    > Hmmm, keen insight.
    >
    > A s the government moves into corporate bonds and credit card debt
    > expect the same disparity between what the government will support/back/guarantee/or
    > take onto its books and what it won't. Unintentionally, what it won't
    > take on it's own books may suddenly become junk even though it was
    > just high yielding before.
    Mar 31 08:45 AM | 1 Like Like |Link to Comment
  • Use Broken Financials for a New Deal 2.0 [View article]
    I agree that they have been delaying the inevitable, but there are so many cross currents in the financials right now it is hard to say what the reaction will be.
    Mar 26 11:36 AM | Likes Like |Link to Comment
  • Quantitative Easing: Money Supply Is Actually Decreasing [View article]
    Perhaps I am missing what you are asking, but this is my answer to how I understand your question:

    When the IOU is written off, whoever holds the paper no longer can claim that as an asset - therefore this asset cannot be securitized and thus "money" is destroyed.

    In terms of double counting, I think what you may be referring to is the multiplier effect. i.e. each dollar in the system is used for many purposes.


    I hope that clarifies/answers? My apologies if I have made it more confusing.




    On Mar 23 03:11 PM Barbarous Relic wrote:

    > Brian Kelly - "The IOUs written are not against existing cash they
    > are a way to pull cash out of an asset, in this way the asset is
    > said to be "monetized". A good example is a home equity loan. Excess
    > equity is simply the perception of an increased value of a home.
    > It is money only in the sense that you can go to a bank and get cash
    > (line of credit) that you previously did not have."
    >
    > This example merely describes a bank making me a loan. Under our
    > fractional reserve system this does represent new money creation.
    > I totally agree with that.
    >
    > But if we then add that $100 IOU on the bank's balance sheet to the
    > $100 I now have in my pocket to get $200, it seems to me that we're
    > double counting. If the IOU ultimately gets written off, I still
    > have the $100 I borrowed -- no money was destroyed. What am I missing?
    Mar 23 03:36 PM | 1 Like Like |Link to Comment
  • Quantitative Easing: Money Supply Is Actually Decreasing [View article]
    The IOUs written are not against existing cash they are a way to pull cash out of an asset, in this way the asset is said to be "monetized".

    A good example is a home equity loan. Excess equity is simply the perception of an increased value of a home. It is money only in the sense that you can go to a bank and get cash (line of credit) that you previously did not have.

    When the asset price falls ,the value of money falls, since the value of that money was initial priced from the value of the asset.

    This is circular logic that got in this mess.



    On Mar 23 01:50 PM Barbarous Relic wrote:

    > I'm trying to understand why credit instruments should be added to
    > conventional money supply measures to get a truer picture.
    >
    > When a credit instrument is issued, it is an IOU given in exchange
    > for existing money. If the IOU is written off, it is simply a recognition
    > that the debt is unlikely to be repaid -- however no "money" has
    > been destroyed in the process. Both a receivable and a payable effectively
    > vanish from the system. Where do I go wrong in my thinking?
    Mar 23 02:39 PM | 2 Likes Like |Link to Comment
  • Quantitative Easing: Money Supply Is Actually Decreasing [View article]
    My optimism for sound growth assumes that the financial landscape will change - by that I mean the so called "zombie" banks will cease to exists.

    I agree that keeping these institutions alive is simply repeating the mistakes of the past. Until the Govt and the banks admit they made bad loans then we will continue to wallow. Unfortunately, we got another program today (PPIP) that keeps the denial alive.


    On Mar 23 01:10 PM axelrod608 wrote:

    > >> "As I see it, the goal of these programs should be to rebuild
    > the financial infrastructure which has been badly damaged. This will
    > take a while and the financial landscape will look vastly different
    > when we are through rebuilding, but if done properly it could provide
    > a very solid foundation for growth." >>
    >
    > Adding non-money derivatives to money does not increase money. It
    > merely points out the unsustainability of the financial system circa
    > 2000 - 2006. Those amounts were the bubble, the highly leveraged
    > unsustainable bubble.
    >
    > Helping the "too big to fail" companies will recreate what the Japanese
    > did - keep zombie banks in operation that were not necessary for
    > the new conditions. I call it government sponsored unsustainability.
    >
    >
    > Your optimism regarding a solid foundation for future growth is unwarranted.
    > The zombies we are now creating will continue to provide no growth
    > and will continue to hemmorhage losses for another several years,
    > adding to unemployment and the national debt.
    >
    > I'm not too worried about hyperinflation. I see the toxic assets
    > as quicksand, swallowing the new money as fast as it's poured in.
    >
    >
    > I hope I'm wrong. I would love to see this mess get fixed and the
    > return of economic good times. Unfortunately, I see no economic
    > data or trends to support that premise.
    Mar 23 02:33 PM | 3 Likes Like |Link to Comment
  • Quantitative Easing: Money Supply Is Actually Decreasing [View article]
    I agree that restoration of the consumer will be gradual which is one reason I do not think we are looking at hyperinflation.

    As I see it, the goal of these programs should be to rebuild the financial infrastructure which has been badly damaged. This will take a while and the financial landscape will look vastly different when we are through rebuilding, but if done properly it could provide a very solid foundation for growth.


    On Mar 23 11:53 AM Alphameister wrote:

    > Excellent, highly insightful article and follow-up comment, Brian.
    > It seems to me, though, that people are resistant to radical change.
    > If and as panic subsides and consumers have achieved marginal improvements
    > in their balance sheets, that propensity to consume will find them
    > gradually increasing their spending both through cash and credit,
    > increasing both the money supply (through credit) and the turnover
    > rate (velocity) of money. I think the goal of these programs is
    > not to push consumers and companies still deeper into debt but rather
    > to allow the restoration of balance sheets to take place gradually
    > rather than precipitously. Any comments?
    Mar 23 12:22 PM | 2 Likes Like |Link to Comment
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