Moon Kil Woong

The Great Egression: What's Next for the Fed?

You are 100% correct that what will the Fed do next is the trillion dollar question. I doubt that anyone is willing to act on any reasonable assumption. That simply is not ever in the cards. Assume they will do the worst possible action and you will be right more often than not.

Surviving the Recession of 2010

I believe it make sense to be long foreign stocks. As for other advise for surviving 2010 it's mostly the same as 2009, try to keep your job. That alone is getting to be a big feat.

Five Charts to Rule Them All: Known Unknowns of U.S. Macro Trends

Yes the markets have a floor because of the great government gravy train in 2010. All aboard the grrrravvvyy train. If this doesn't sound like economics you're 100% correct. It is foolishness. The same type of foolishness that hearalded the great depression. 1) run government spending to unsustainable levels 2) make everyone addicted to easy money 3) then it ends. That's when the revision to the norm kicks in and we get free fall with no protection.

These charts only tell 1/2 of the story. Plot long term interest rates (the Federal Reserve and the government is supporting short term zirp policy) and we can see where the money flows are going from and into. All is not sunny just because the markets are rising. Your dollar depreciation is reflecting that as well. This is not healthy recovery money.

Bogle: Investors 'Getting Killed' in ETFs

Ok, if you are a really smart wise investor you would buy and hold your own stock, bonds, and/or currencies and commodities and trade it yourself when neccesary. If you can't you probably shouldn't be in it but likewise gamblers shouldn't go to the casino to gamble either.

Mutual funds aren't the best investment around. They tend to consistantly underperform their index, have fees, and you pay taxes on the theoretical profit. ETFs are no different. But hey, who ever said people were rational obviously hasn't watched the people around them in any level of detail.

The fund industry is a multi billion dollar industry built to prey on investors fear telling them they are incompetent at making financial decisions. Perhaps they are right, after all people keep dumping funds into mutual funds even though facts tend to point to the conclusion that if investors are incompetent, then too are fund managers.

I invested in mutual funds when it was a 401k and I got matching funds. Otherwise... forget about it.

The Role of the 200-Day Average in Risk Management

Thanks for the charts. Although I'm not a chartist myself I tend view the 200 day trend as a more fundamental and sustainable indicator. You may miss the "green shoots" but you also miss the oh shoot, I just got stuck again false rallies.

The uptrend in bonds interest rates is a signal money wants to move out of that into other places. The oil rally is another woorysome sign. Inflation is looking to rear its ugly head. So the question is, is stock equities worth the inflation hedge considering the volatility risk? Certainly to some, certainly not to others. I would be inclined to say some money moved into equities on the inflation premise, but smarter money is probably moving towards commodities.

Either way, it may be good for the stock market in the short run but inflation is liable to flatline the economy in the intermediate term. Thus, the 200 day average may be quite accurate that we aren't out of the woods yet.

Week in Review: Part III, Bonds

Thanks for your article and providing these datapoints. It would seem hot money is starting to move into things that give higher yield. Perhaps that helps explain the rise of stock prices. A real worry and rush to higher yield to conteract inflation fears may look good to start but if it gets underway, it can get quite nasty.

Even at 4% long term treasuries still look like a bad short term bet. I expect them to rise on the continued Fed balance sheet expansion, bad trade imbalances, and politicians gorging their constituents of funny money.

When will inflation rear it's ugly head? No time is good, but it is looking like the second the economy picks up. After all, the Greenspan effect II is in effect. Once again, the Fed is keeping interest rates artificially low for way too long in order to satisfy short term at the expense of the longer term.

Of course I'm not clarvoyiant. I could be wrong. The Fed and Treasury could decide to stop TARP, PPIP, and other silly givaways, magical taxpayer guarantees, and the buying bonds no one can afford to keep. Congress could balance the budget. Everyone in China could buy GM cars to balance the trade deficit. Deflation could set in if the government deleveraged (actually spent less rather than more each year). I just figure the odds of this happening is rather remote.

Global Markets in Review: Stocks Higher on a Stimulus and a Prayer

It's nice to see some short term bulissness even though long term everything remains bearish.

The important fact is the bulishness is market bullisness not economic (no real fundamentals to back it with). And the other bulishness, as morph points out, is an even more worrisome bulishness: Bullishness on commondities and staples which correctly points to an unsustainable low treasury yield and possible inflation during a very bad recession later.

Credit Crisis Watch: Some Positive Developments

Thanks for the graphs and good article. As you can see, since CDS and CDO's are unregulated no one can be sure of the accuracy of any reporting on them. Also as you can see, since they are unregulated banks or financial institutions can gamble on anything with them. It is funny, scary, that their recent love affair is gambling on what country will be first to fall, default on their obligations and ruin their currency. It is also funny to see how many banks use TARP money to gamble against the US government. Since most CDS and CDO contracts are written and bought in the US you can guess a great many bad banks are betting on the destruction of the US currency.

Why you might ask. If the US dollar goes to 0 or near that, they get paid off in Euroes and can pay off all their bad losses at the US citizen's expense because their liabilities are now worth hundred of a euro to the dollar. Problem solved for them. Thus your interests are 100% at odds with off balance sheed derivatives mega bank speculators in this regards. The worse they get and the more money they beg off government the closer they get to ressurection either through taxpayer bailouts or destruction of the US dollar. This is one reason these derivatives must be regulated and disclosed. Why don't they write contracts betting on their own bank's collapse. Oops, they probably did already.

That is why nothing is getting better. These people are out of control and too many people know it even though the government keeps letting them hide in very black off balance sheet accounting boxes. My bet is if you only saw what they are doing there it would make a coven of satanists look like angels.

Market Leaders Hesitate on Stimulus Plan

After the brunt of this earnings season ends this week look for asmall step up aided by stimulus expectation. Then watch it slide back down in February. The old adage buy on the rumor sell on the news is applying more and more to government stimulus/ bailout packages.

There is no way government stimulus can stop the slow train downwards but it can slow it in fits and starts at the cost of the government sucking away its own financial stability and imposing inevitable later penalties on its taxed populace.

Credit Crisis Watch: Signs of Progress?

A great slew of facts. Even though credit markets are thawing, the public is now frozen. I don't see the resumption of 2006-2007 spending anytime soon. I suppose that's a good thing since it was running US households into mass debt. Now the only lemming running towards that cliff remains the US government.

What will we do when 50% of all Federal taxes goes towards debt payments? I fear we will soon find out.