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I could put on this bio my education, work experience, investment strategy, and a nice thin (if I can find one) picture of me in a suit looking *smart*. Sorry but that's not my intent here. Sure I invest, help family make financial decisions, and make a ton of mistakes along the way. But my time... More
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Interesting Times For All Commodities And Investments!! CHAPTER 4......
  • Interesting Times For All Commodities And Investments!! Chapter Lucky 13 ???.......  178 comments
    Jun 20, 2013 3:18 PM

    Where do commodities go from here? are stocks and bonds still sound investments? Oil. ETF'S, Physical metals..

    Folks.. we are growing and posters like it. If you are new to investing then this site is for you.

    I am going to be the first one to admit that I haven't a clue when or if Gold and Silver will ever take off in price. I expect they will though. Additionally I don't see much coverage or articles pertaining to the other commodities. So I would like to start up a blog where every commodity, and every investment is on the table for discussion. Even political questions. I only ask that you be courteous!!

    Someone posted the difference between being smart, foolish, and a moron. Well I have been all of the above and I will "man up" and admit it! However I came away from those experiences with both battle scars and knowledge.

    For years I have been reading basically any day now Gold and Silver will explode. Yet somehow the can gets kicked down the road and I live to learn another lesson. Then Sprott's ETF'S are talked about as being safer then others. (PSLV) is the silver ETF.

    With all the QE'S basically not creating any new jobs what will be the consequences in the future?. Will we be "CYPRUSED "?, are we in a serious stock market bubble? Obviously we read daily about these concerns but what about other commodities? Here is where most of us are uninformed and relish an education.

    Stocks are fine to discuss as well. All of us know that commodities should only be a % of your portfolio. I owned (PSEC) and liked the dividend. Others may not ! So please feel free to entertain your picks and why!

    REE'S have been an interest for a few of us over the last couple of years. I had exposure to Lynas (OTCPK:LYSCF). Some posters might have questions about this group as well.

    If you disagree with a post please bring proof and display your argument. If you agree with a post, find one interesting, or have questions please feel free to respond. We must remember were all in this together. So if you want to talk (GLD) or (SLV) that is fine.

    Now if some have an opinion on Copper, Zinc, Palladium, etc. Do not hesitate to post that. Most of us might not understand the post but I am sure well be open to learning. Lumber might interest someone and I would like to learn why I should invest in it. PLEASE bracket any symbol you use so that I can include that in the topic forum. It also allows a reader to click on it and get some data as well.

    My part time job is a college and high school official so I can sit here and referee all day long. I honestly hope that ALL will be professional with their comments. So lets see who comes on board. Looking forward to what can become a nicely knit group of diversified investors.

    I have invited a few Authors whose work I admire to bring their expertise to the forum here as well. Tom, Eric, Hebba, to name a few in no particular order. I am sure they will drop in once in a while to voice their opinions. Please feel free to ask your favorite Authors to join in the discussion as well.

    These are highly recommended people that I suggest you follow as well. I have learned a ton from them and find their work both challenging and engaging. Two areas that I hope inspire people who normally don't post to now feel free to do so !!

    Now I also feel compelled to encourage the use of the like button. It is human nature that once someone posts and see the like button add up they will feel they made a valid point. Upon that feeling they will post again! So if you do like what someone posted, either a question or an answer PLEASE use it ! It might help our core grow exponentially as well.

    As you see I have stopped adding any new symbols as they were growing way too fast for me to keep up !!

    We are living in some very INTERESTING TIMES !!

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: Everything is on the table for discussion..

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Comments (178)
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  • Author’s reply » Very Interesting day !! Rates rose, stocks, gold, silver fall.

     

    WHERE DOES THIS TAKE US ??
    20 Jun 2013, 03:19 PM Reply Like
  • Until tapering actually begins, I could see the S&P getting back up over 1600 and the 10 yr pushing up towards 2.50. The next events to watch will be Ocare and DF coming online, which will occur mostly in 2014. Those events will lead to more unemployment. More unemployment will lead to risk off, and then S&P could drift back down to 1400 and the 10yr back down towards the 1.60 range. Again, assuming nothing else happens, like a war in Syria or someone turning the cameras back on in Europe.

     

    At this point it will be a race between fiscal and monetary policy as to which one will bring on risk off first. Tapering could do it this year, if they actually do it. If so, then they might reverse after a few months, and get equities reinflated. If not, Ocare and DF will do it, in which case the Fed will have to keep QE going to offset the damage done by fiscal policy. If you get both at the same time, you would get a large pullback, in which case the Fed would probably quickly reverse and not only restart QE but maybe go up to $100 billion a month.
    20 Jun 2013, 03:33 PM Reply Like
  • Author’s reply » @HOOP

     

    Can you explain OCARE and DF for some that don't understand it? Thanks!!
    20 Jun 2013, 03:40 PM Reply Like
  • I mean Obamacare and Dodd Frank. The details of what they do (or rather, what they are INTENDED to do) are irrelevant. At the end of the day they are an arbitrary fixed costs imposed via the coercive power of the gov. As such, they are just a tax. They are basically just additional costs for the health care industry and the credit industry. In other words they are a price fix. You could also view them as an increase in the minimum wage, as they have the same effect. A price fix means shortages and shortages mean unemployment (if you are making less things, then there is no reason to employ people).

     

    Since the Fed has a mandate involving employment, when Ocare and DF start to increase unemployment, the logical course for the Fed is to respond. Since the only think the Fed can do is control the amount of notes they generate, then the logical conclusion is that they will start generating more notes. That will mean asset inflation somewhere in the economy, and with unemployment going up, it won't be CPI inflation, it will be equities inflation. So I could see the S&P getting reinflated after it deflates from either Tapering, Ocare, DF or all three at once.
    20 Jun 2013, 03:49 PM Reply Like
  • IT,

     

    I dont think we can say whether this will be a short and sweet correction or a long drawn out bear market. I see both possibilities.

     

    But short term, we need to consider whats really going on. The Bernanke said that he isn't going to taper or end QE until the labor markets improve (unemployment goal 6-6.5% I think).

     

    IMO, we aren't going to see any 6% UE this year or next year unless there is massive book cooking by those who set those numbers and whats the benefit to doing that? He also said that if the economy doesn't improve they would hold off on the tapering plan and continue to keep the low interest rates.

     

    So it seems there has been an overreaction at this point. QE will continue, no tapering will happen, because neither the economy or unemployment are both going to improve sufficiently to allow for it. Unless the mandate is changed it should go on. And on.

     

    Perhaps by next week there will have been enough time for thinking this through and realizing those things. Jobless claims rose again today, not a sign of strength. But maybe not, momentum has a way carrying things away.

     

    But then, maybe the sell off is not truly related to Bernanke's comments. They may be the excuse but not the real reason. The markets were getting ahead of economic fundamentals, IMO. Everyone knew a correction had to happen sooner or later and evidently the decision is its going to happen now.

     

    As we go forward and economic numbers reflect the continued weakness in the economy and as unemployment doesn't come down, eventually the realization will occur that there won't be an end to QE at all. When that happens we will see if markets decide to trade up on endless QE or if the economic numbers alone finally determine whats going to happen.

     

    The markets are between that rock and something hard.
    Has QE worn out its welcome and lost its mojo?
    Are investors finally realizing that now bad news is really bad news and good news is bad news too, a reversal of thought.

     

    The 50 day MA is now toast, as is last weeks low. Fridays close is relevant as unless there is a sharp rebound tomorrow that will mark a weekly close below the 50 which carries more weight. Watch the 200 day MA. For many investors a break below the 200 is a sell signal, though the break through it last Nov was short lived, that was under different circumstances.

     

    I think there will be a lot of investors thinking about the last 4-5 years market and ride this out. But as you said, for those 60 and older, they dont have a lot of time to ride through another 2 year bear market and then wait another 5 years for a rebound back to recent highs.

     

    Beats me what the outcome will be but neither a rebound in a short time or a big downturn will surprise me at all. Another crash like 2008 will convince quite a few (probably older) people to stay away from stocks for the rest of their life.

     

    At some point I expect a painful reset of the financial system to wash out all the malinvestment, but no clue when that might happen.
    20 Jun 2013, 03:57 PM Reply Like
  • Tampat,

     

    and maybe its just a normal correction in one of the strongest bull moves in history..

     

    As of this moment i'm opting for that scenario,, nothing has changed, except a knee jerk reaction and emotion.. Throw in the "sell" programs I mentioned earlier initiated at a key tech level and
    the results are a 40 pt drop in the S & P, fed by more emotion..
    20 Jun 2013, 04:16 PM Reply Like
  • F&G,

     

    Agree that could be the case.
    This time.
    20 Jun 2013, 04:30 PM Reply Like
  • Today's drop finally made it to a 5% drop to the previous SP500 high. What is better to me is that all sectors were selling off. To me that means that some of the good stocks got trashed with the rest. Which means there are deals to be found. I just have to go do the work to find them. And, I will keep looking for things selling below value until earnings season which starts in July.

     

    So I have a few weeks to dig around and concentrate on individual stocks and wait and see what the markets as a whole do???
    20 Jun 2013, 05:03 PM Reply Like
  • Tampat: The Fed has linked ZIRP specifically to the 6.5% unemployment rate, not QE.

     

    I know that a lot of people never read my links so I will drag and drop the relevant discussion from the last statement, which is the same as in previous statements on this point:

     

    "To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored."

     

    http://1.usa.gov/11MwTO2

     

    QE is linked to a broader list of economic conditions and is not expressly linked to any specific unemployment rate:

     

    "To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month."

     

    QE will end before ZIRP.

     

    I noted in prior comments that the FED reduced its estimate for unemployment to 6.5% to 6.8% in 2014, from the 5/1 estimate of 6.7% to 7%:

     

    http://1.usa.gov/11MwTO7

     

    Bloomberg Article:
    http://bloom.bg/10BKKwA

     

    The lower end of the new estimate, if achieved, would suggest the ending of ZIRP late in 2014 rather than in the 2015, the previous estimated time period.

     

    The pricing of the federal funds futures contracts suggested a .5% federal funds rate in 2016 about a month ago but has since moved to price a 1% federal funds rate by 2016 about seven days ago when I last checked that item. This is changing fairly rapidly now.

     

    A chart of the real federal funds rate can be found at 44 of this recent Richmond FED publication that has a number of useful charts:

     

    http://bit.ly/10BKMVr
    20 Jun 2013, 07:58 PM Reply Like
  • Author’s reply » OK FUN TIME...

     

    I was thinking about ordering TEE shirts for this group.. What should we call ourselves. You heard Double Guns have a group called the "Renegades"... Any ideas ??

     

    I haven't a clue.... That wasn't my choice just my opinion.. lol
    20 Jun 2013, 09:02 PM Reply Like
  • Author’s reply » F&G

     

    Has the S&P broken below what you thought could lead to a bigger sell off yet? I believe you called it a *swoosh*??
    21 Jun 2013, 11:49 AM Reply Like
  • IT:

     

    SPX has broken 50-day EMA. Now, we start looking for support on charts. The next one of any size is 1542. If that doesn't hold, then 1488.
    21 Jun 2013, 11:54 AM Reply Like
  • IT, We go the intraday swoosh , i thought might happen yesterday aft..

     

    Tack has laid out good support levels,, close enough to mine so i wil certainly agree..

     

    For the really short term guys , I "hear" there may be some computer "sell" programs initiated at 1575,, we hit 1577 as the low so far.. another swoosh down if we break 1575 ? who knows.. 

     

    I'm not going to put a lot of emphasis on today either way,, it is a quadruple witching day in the options world and that produces too many cross currents in the market that distort the issue..
    For those that need an explanation of that - here is a link
    http://bit.ly/16U6y5Y

     

    Next week will tell more, end of quarter window dressing , etc. by the funds will likely add more pressure, IMO

     

    For LT investors , these reactions are blips and come with the "turf" .
    21 Jun 2013, 12:38 PM Reply Like
  • S&P broken 50-day EMA, then bounced back up later in day on lower volume, but not past 1600. What does that tell?
    21 Jun 2013, 11:55 PM Reply Like
  • Curls,

     

    The 50 day MA has been a support trendline for the S & P since the beginning of this year. The recent drop below that support now indicates, as Tack mentioned, the need to find another area that may provide support. Sometimes stocks/ averages break these support lines only to quickly close back above them indicating the short term uptrend is still intact.. I mentioned that 1575 might be a first line of support in a previous comment , it did hold there friday as the S & P traded down to 1577 and reversed.

     

    Future direction will be determined if this new support holds or if the S & P can retake the 50 day MA..

     

    All of this is very short term oriented stuff. If i were to "guess" it would be that we will test 1575 again and go a bit lower - i'm watching 1550..

     

    Hope that helps... :)
    22 Jun 2013, 08:46 AM Reply Like
  • F&G:

     

    The SPX 50-day EMA stands at 1614, and even after Friday's minor bounce the market remains well below it. Friday's anemic rise is not suggestive of any capitulation or a new reversal back above that level, so it wouldn't be surprising to see some more selling arise.

     

    As can be seen from the chart, there is minor support at 1553 and larger support at 1541. If neither of those hold, the next identifiable support arises at 1482. If that would fail, then it's all the way back to 1416, all still above the current 200-day EMA.

     

    http://yhoo.it/y13la5;range=1y;compare=;ind...
    22 Jun 2013, 09:20 AM Reply Like
  • Tack,

     

    Agree, As i mentioned in a earlier comment , I throw out friday's action simply because of the cross currents caused by "quadruple witching".
    Small consolation on Friday was that it did reverse at 1577.

     

    Your support areas coincide with mine but unless i'm missing something the 200 day EMA is approx 1521 ..

     

    In any event a 'flush " to 1482 would be about a 12% pullback from high and not out of the question.. & have the fear gauge at 8 ..

     

    As we progressed this year towards 1700 , I targeted 1490 as the new possible 'low" on the charts for remainder of '13. We shall see.

     

    Since its virtually impossible to catch the end of any correction, I'll look to deploy some cash in the 1550 area if we get there, assuming the individual names have come down to the levels I am looking for..

     

    I've come to realize that nothing is out of the question concerning the markets.. so flexibility is key..
    Generally speaking i agree with your assessment that we can expect additional selling , it just has that 'feel" right now. & we have done a bit of technical damage with this week's 2 day 60+ point decline in the S & P .. 
    22 Jun 2013, 10:51 AM Reply Like
  • Author’s reply » So since I was questioned about sitting out of the market this year and losing around 18% now it seems possible that can be retraced to around 12%??

     

    This is why I sat out a year too soon. To me a 6% gain , or possibly less, just wasn't worth the risk!

     

    This isn't aimed at anyone in particular. Just an explanation as to why I went to dry powder while the markets MIGHT go to dynamite !!
    22 Jun 2013, 10:55 AM Reply Like
  • F&G:

     

    Yes, my booboo, the 200-day EMA is about 1521, so that 1541 support looms a bit higher in importance, at least technically.

     

    When markets stop observing fundamentals and believing in the future, they are turned over to the trader environment, and, often, things start following formulaic rituals more closely, as algorithms and cosmic belief in patterns start to control market behavior. It will be interesting to see what develops.
    22 Jun 2013, 11:24 AM Reply Like
  • IT,
    Let me try to explain a different approach--
    You know I respect your decisions concerning your strategy..

     

    Agree if you do simple math ,, can't argue with your numbers.

     

    Since I always get asked that question, the answer lies in the fact that during this run in '13, Many have booked nice profits along the way, that seems to always be forgotten. and that skews the numbers in my favor..

     

    Strategies are different for all , if you bought the averages , ETF, Mutual funds etc.. can't argue ,, However, using time tested strategies and principles with individual stocks, you will increase you chance to harvest gains exponentially. Now the next question I get is that it requires market timing , etc. To some degree yes , My response is it requires common sense, and I will add experience doesn't hurt either. Without getting too long winded , I have set-up core holdings, then add positions along the way for 3- 6 9 months , use options for more income. It's managing money and its work , that is why some folks decide to seek out advice and management.I admire all that do it themselves successfully many here on SA but not everyone can.

     

    What's the difference , Investor A buys the averages and goes on his yacht for the rest of the year ,, Investor B stays home completes due dilligence studies charts, in short works hard . Investing , means trying to make money, there are no free rides , so it is Hard Work . A lot of folks forget that ..

     

    Now all of that goes away if investor A buys his / her portfolio and adds to it from their yacht every year , then comes back 25 years later.

     

    However if we are going to select a period in time and compare then my approach comes into play..

     

    The "Yacht" example has nothing to do with Tack and his cabana girls --- :)

     

    Hope my example helps showing a different approach..
    Well before i decided to "help" other folks , I managed my own finances for decades.. Now after al that time I think i finally got it !

     

    Well maybe - at times the market can be a very humbling place to be...

     

    :)
    22 Jun 2013, 11:27 AM Reply Like
  • Author’s reply » Sorry, I had to just pick myself off the floor. TACK made a booboo?

     

    Pinch me, I must be dreaming. I just see Cabana girls walking all around the poolside..
    22 Jun 2013, 11:32 AM Reply Like
  • Author’s reply » @FEAR

     

    I never said it was easy managing one's money. I commend those who know how to do it as well. But when QE was introduced all you had to do was throw a dart at the board and you mostly found winners.

     

    Now well see how smart the stock pickers are, and I don't mean you professionals. It is meant for those doing it at home. I remember not so long ago people trying it and losing their shirts.

     

    The markets can be a very unforgiving graveyard for some.. AND I know a lot of those in that graveyard who THOUGHT they figured out how to play this game...

     

    Is it Vodka and Tonic time yet?? :)
    22 Jun 2013, 11:38 AM Reply Like
  • IT:

     

    I see the kind of reasoning you suggest mentioned frequently in SA and elsewhere, but it's simply illogical in the final analysis.

     

    Unless one times an exit to cash perfectly and market re-entry, such that one buys issues at lower prices than one was previously holding them, any parking of funds in cash is counterproductive. The reality is that, even if the market did pull pack 12%, or even 15%, you would be faced with the following realities:

     

    1) Absolutely no better prediction of where the markets would go, up or down, than when you eschewed the markets 18% ago.

     

    2) You would be faced, if you adopted similar positions, with re-buying holdings at a slightly higher basis than if you had held onto shares previously. That undeniable fact ensures two things: a) that your future profits will be reduced by the higher basis and b) that your capital at risk is higher than if your basis had been lower, with no greater assurance about the future direction of the market.

     

    To use an analogy, it's like a guy who climbs in off a 10th-floor ledge because he's afraid he may fall off and kill himself, then, telling himself a year later that it's ok to go out on the ledge again, but this time on the 11th floor. H'e no safer, no matter what he may think.

     

    There is only one approach that adds to value consistently in markets, and that's reducing one's cost basis of investment holdings, if and where possible. In order to accomplish this, if even attempted, one must add to issues when they fall below current basis or, if one has sold out, as you did, buy them back lower than the original sale price. Any other action results in reduction of future gains with no concomitant reduction in risk.
    22 Jun 2013, 11:39 AM Reply Like
  • Author’s reply » @TACK

     

    I understand your reasoning and I would agree with it when my financial situation younger was different. I am not trying to time the market here though.

     

    I was happy with my return for that time period and was essentially concerned about what might happen once QE WAS ANNOUNCED THAT IT WAS ENDING. Now I can be wrong , and that is fine, but I feel we are in uncharted waters now.

     

    I was correct in that their would be a frenzy when it was finally realized the downside of money creation. Bonds are exploding as we speak. So being conservative with my profits and my principle I made the decision to just sit it out a while.

     

    I might be wrong and miss profits, or I might be right and saved my investment monies. So as you can see ALL INVESTORS have different criteria , different tolerance levels, and of course different time horizons.

     

    My Metals have me way in the green and to me is insurance against inflation. Some invest with the thought of NEEDING that money one day. Just look at those folks retired and having what the perceived as *safe* money in bonds. Now to me this isn't safe anymore.!!

     

    So again you have your reasons and educated yourself over time to make decisions. Others like me might not know how to read charts, or invest using them, but as I have said the closer to my retirement years I get the more conservative I need to be.

     

    In my case I NEED these funds to survive and I will do what I deem is in my best interest. Now we shall see in 6 months if I made the right choice or not!

     

    My call, my responsibility. Ok heading out to my paddleboat for the day. Have a good one, KEEP away from the Cabana girls !!
    22 Jun 2013, 12:18 PM Reply Like
  • Tack,
    Ok,

     

    2nd paragraph is a perfect way to describe what transpires in a corrective phase..

     

    Enjoy !
    22 Jun 2013, 12:30 PM Reply Like
  • The banks failed us and were bailed out by taxpayers, and so laws aren't needed to regulate them? In a capitalist society government is the scale if you will that keeps capitalists in line. Without laws, we have unparrelled greed and we have another banking crisis.

     

    I don't think Dodd Frank is the answer but what do you suggest instead, self regulation? That didn't work out to well, and last time I checked you had a better chance of going to jail for stealing a candy bar, but if you bring down the banks with crazy leverage, you most likely got a bonus.
    22 Jun 2013, 04:43 PM Reply Like
  • It takes effort but I would think digging a ditch is hardwork. Analyzing trends and shorts takes effort but commuters have made it easy.
    22 Jun 2013, 04:46 PM Reply Like
  • IAM

     

    Im sure that ditch digger will agree,

     

    Computers have made analyzing trends easier, knowing what to successfully do with them is the "Hard" part ...

     

    :)
    22 Jun 2013, 04:53 PM Reply Like
  • I have done both. But, I think picking cotton was the hardest, on my hands anyway...:oP

     

    As far as researching stocks it has come a long way from WSJ and IBD to screen and ordering SEC filings to dig through.
    22 Jun 2013, 06:04 PM Reply Like
  • Author’s reply » @LAMSTOCK

     

    WELCOME to our group. I hope you continue to post your ideas...

     

    Thanks!!
    22 Jun 2013, 11:49 PM Reply Like
  • F&G & Tack:

     

    Thank you very much!

     

    So 1575 was a new support. Friday was a minor bounce? I hadn't realized that, (but with witching day it's particularly so.) I'm a learning.

     

    @Fear - yes it's short term. I'm in all cash. So I'm watching closely. If markets reverse back up, I want to get back in. If they go down, I have time to form my plan for the long term. I'm just looking for the deadline for my homework assignment :).

     

    If they test lower, I'm going with my theory that Fed comments rule everything & it will keep going lower until either sometime after
    1. tapering begins (& sky hasn't fallen), or
    2. lack of tapering is announced & we get back on the merry-go-round.
    3. tapering begins, sky doesn't fall, but it does effect stocks & they find a bottom from actual effect.

     

    I will say, I haven't fully integrated interest rates rising from panic, into my theory yet.
    23 Jun 2013, 08:33 PM Reply Like
  • jhooper,

     

    agree to most of your comments re: tapering , Im still in the camp of no taper in '13. Yesterday didnt change my outlook on that. In fact nothing was said yesterday to change my macro outlook,,

     

    Believe its much too early to speculate on more unemployment and assoc. S & P 1400 , Rather take one step at a time , we probably move to 1550 , plenty of support there I expect to put some money to work a that level. IMHO ,I dont think i'll be alone.. .As of now, my worst case is 1490 which i set earlier this year..
    20 Jun 2013, 03:54 PM Reply Like
  • "Im still in the camp of no taper in '13."

     

    I think I am too. The tapering talk just feels like jawboning. It seems like a way to test the waters to see if pulling QE back can really be done without much adverse affects for asset prices.

     

    I'm more or less try to think about all the scenarios presented based on what I am hearing so I can think them through and not be caught flat footed.

     

    For now, I tend to think QE will keep going at its current pace, and that should get us back into the 1600s and keep the 10 yr going up in yield.
    20 Jun 2013, 03:59 PM Reply Like
  • Author’s reply » Ok, if most of you believe that QE'S will continue for quite some time then are the metals a buy ? I thought QE'S were good for the metals.

     

    If I am wrong I would appreciate some thoughts ..
    20 Jun 2013, 04:13 PM Reply Like
  • IT,
    No expert on the QE affect on Gold.. Nor an expert on the fundamental issues with gold and what drives prices. However I have looked at the technicals and believe there is more downside to come.. Gold fell thru yet another key support level today and unless there is a very swift turnaround in the next few sessions I believe the trend will remain down.
    As I see things, the price is in "no man's land" at the moment with no real support until $1,000. While there may be upticks and rallies along the way unless there is a very quick reversal right here at these levels , I see no reason from technical view to doubt the 1,000 level is a very real possibility.
    This is not about Gold bashing , I get asked almost every day , what is going on in the gold market ?, so I simply a look at the picture that is being presented.

     

    I then looked more closely at this pattern because I believe this fits into my Secular bull market theory. Recently the price action of gold may have provided another clue that in fact we have emerged into a new secular Bull. Over a long history Gold has traditionally had an inverse correlation to stocks. While their paths show an ascending slope, stocks outperform during secular bull markets and gold shines during a secular bear. The latest breakout in the S & P above its 13 year range and the collapse of gold may just confirm my beliefs of the emergence of a secular bull move. I also think it refutes the theory that this latest move in stocks was merely a rally in a secular bear market as many have professed.. There is plenty of other evidence to support my convictions here , the action in gold may now have cemented that case.
    20 Jun 2013, 07:36 PM Reply Like
  • IT:

     

    In the last Chapter, I mentioned that the gold and silver market went into a parabolic move starting in mid March 2009 based on what turned out to be an erroneous belief that QE would cause inflation. Sooner or later, investors have to face reality and the facts as they are, rather than what they want them to be or believe them to be .

     

    Inflation is going down, not up. The market finally put two and two together and started to realize late in 2011, slowly at first, that QE was not leading to inflation. Maybe it will in the future but it has not done so to date.

     

    The core PCE price index number and the core CPI have been drifting between 1 and 2% since early 2009.

     

    After more than four years of QE, the BLS reported that CPI had increased 1.4% on a non-seasonally adjusted basis for the year ending in May 2013:

     

    http://1.usa.gov/rFGzWe

     

    The last report on the Personal Expenditure Price index (PCE) is contained in this report:

     

    http://1.usa.gov/qTFsOo

     

    "The price index for PCE decreased 0.3 percent in April, compared with a decrease of 0.1 percent in March. The PCE price index,
    excluding food and energy, increased less than 0.1 percent, compared with an increase of 0.1 percent."

     

    We can agree that the FED has been very aggressive in its QE program since September 2012.
    20 Jun 2013, 08:18 PM Reply Like
  • Wow it seems the tables have really turned on the metals and PM folks. I think i'll take the lonely side of the PM argument here - we're really at the point where gold/silver mines are unprofitable.

     

    I've written a number of articles on this (silver industry all-in costs for Q1: http://seekingalpha.co...) and Fresnillo's costs (http://seekingalpha.co...). For gold a large amount of gold supply is unprofitable at current prices.

     

    Obviously, the sentiment is so bearish right now its tough to even imagine a large up day (which is usually when they happen), but for investors who take a long-term view of things its very attractive to buy these assets at prices cheaper than their extraction costs.

     

    As for the tapering argument, last I checked gold has actually done very poorly since QE-forever and I think the general consensus that tapering is bad for gold is actually incorrect. Remember gold's bull market began and was sustained BEFORE any QE's - but yet today people think if there's no QE that's the end of gold. Finally, remember rising interest rates increase government budget deficits - a 1% rise in rates adds $170 billion to our budget deficit. Remember structural imbalances in a budget are exactly the drivers of gold that people are forgetting.

     

    I think that at a certain point the markets will realize these things and so if investors can hunker down and have some courage, I think they will be rewarded with gold/silver investments. But in the short-term the drops could continue
    20 Jun 2013, 08:50 PM Reply Like
  • Author’s reply » Check this out !

     

    " Big Ben made a big mistake in the way he announced the Fed's plan to end QE yesterday, laments CNBC's Larry Kudlow. When it comes to ending the bond-buying program, the training wheels needed to come off slowly. But, while investors were still pondering exactly when a tapering of the program might begin, Mr. Bernanke laid out a plan to completely end QE in roughly one year or less. The abrupt policy shift immediately has sparked a rout on Wall Street, and it's going to shake up confidence even more, Kudlow says, perhaps even slowing the already anemic recovery."
    20 Jun 2013, 09:05 PM Reply Like
  • Hebba; I noted in a prior comment that the P.M. London fix for gold on March 18, 2009, the day of the QE announcement, was $893.25. The price went to $1895 in early September 2011 based on the London Fix. Most of the dollar move was after QE.

     

    Based on the London P.M. fix, gold topped out at $850 on 1/21/1980. It would take about $2,402.95 in 2013 to buy what could have been bought for $893.25 in 1980.

     

    http://1.usa.gov/tj5h8X

     

    It would be hard to convince anyone buying in the 1979-1980 period that gold had ever entered into a bull market after the run from 1970 to 1980, based on the purchasing power of money then compared to now.

     

    On a non-inflation adjusted basis, gold did rise from the low of $280, reached in January 2002 to the $893 price on March 18, 2009, so the move did begin in earnest before QE, at a price prevailing in January 1985 or seventeen years earlier!

     

    How many enjoyed the run from the January 2002 low? That buyer did experience a bull run without question.

     

    If I go back in time to say early 1996, the price crossed over $400 per ounce and was moving mostly from $330 to $420 between January 1990 to January 1995. The price hit $420 in early 1990, and a buyer at that price would have seen his investment barely double in nominal terms by March 2009 .

     

    As to your point about the Federal government's interest obligations and structural deficits, I would agree up to a point. Our government is not an example of responsibility or probity to be sure. The entire accumulated debt of the U.S. since the founding of this country was under $1T before Reagan assumed office and was running far more than that number every year since Obama took office.

     

    But, real GDP continues to grow and the politicians have not yet sunk an economy that has been a money growing machine for well over a century.

     

    How much additional tax revenue would be generated by a average 5% interest rate on risk free savings, an offset to your number. The FED knows exactly how much money is earning next to nothing now. Slap a 4% interest rate on just the $6.9793 trillion sitting in savings accounts and then magnify the impact of that additional income on GDP growth and job creations resulting from more consumer spending.

     

    Fed's H-6 Account-Update 6/20/13

     

    Over $10 trillion is earning almost nothing now due to ZIRP and QE.

     

    The St. Louis FED says the average rate being offered on a 5 year CD was .51% as of yesterday.

     

    http://bit.ly/11HyB4L

     

    My Vanguard MM is paying .01% or about $100 for a million in a year. Households have over a $1 trillion in MM funds earning that kind of rate.

     

    The average maturity of the FED's debt is slightly over five years as I recall. The increase in the interest amount will stay down for years due to the FED continuing ZIRP and then most likely raising federal funds at a really slow pace thereafter, keeping the bills and short term rates in negative real yield territory.

     

    I also pointed out in another comment that the deficit as a percentage of GDP is rapidly shrinking, due to a combination of tax increases, more profits and income to tax (a larger pie) and some spending cuts, including spending directly tied to higher unemployment and to the recession in general.
    20 Jun 2013, 09:48 PM Reply Like
  • @Hebba

     

    I've been thinking with metals down, of waiting for more "shake down" then buying some. You've given some solid reasons to keep me interested in tracking this possibility...!

     

    "lonely side of the PM argument here - we're really at the point where gold/silver mines are unprofitable."
    With fuel up & metal down & regulations, that makes perfect sense. Sounds like the sensible side. On flow of reserves, I'll have to read all your articles.
    20 Jun 2013, 11:47 PM Reply Like
  • IT, the biggest relationship I have seen for gold is the value of the dollar. Dollar goes down gold goes up and vice versa.

     

    Like this morning:
    http://on.mktw.net/19m...
    21 Jun 2013, 06:28 AM Reply Like
  • Author’s reply » exactly..the dollar should weaken with QE'S,,,,
    21 Jun 2013, 07:18 AM Reply Like
  • @curls - Oh absolutely it really depends on your time horizons, if you're trying to get rish fast then anything can happen to the PM prices. But if you look at the cold, hard commodity facts (extraction costs and inflation) then long-term these prices are a steal.

     

    We hear about "peak XYZ" all the time and so I think we've been desensitized towards it, but I really think we've hit peak gold and the declining supply seems to back that point up. I'm going to be looking at the miners' 2nd and 3rd quarter production numbers carefully becuase I expect them to be down significantly.

     

    Finally, thinking about the market action recently, as stocks rises gold drops b/c the argument goes who needs gold when the ecnomy is improving. The reason why many people bought gold was inflation, and if people are shaken out of gold because of these factors it would be the perfect setup for the final leg in the bull market. What happens if the economy does improve and all of a sudden all this QE money that is being injected into the bank balance sheets finds itself in the real economy via fractional reserve lending?

     

    If that happens the majority of gold bulls would have already left the gold market because they sold "because stocks were giving good returns and the economy was improving" only to find themselves out of the gold market at the precise time that gold would show its inflation protection value...
    21 Jun 2013, 04:27 PM Reply Like
  • @Hebba
    You've hit on a number of convincing aspects for long term rise. I need to figure out the right entry time. Soon enough to catch a low, but not so soon that my money is doing nothing. I've got 15 years to retirement, then I don't need all my funds right away.

     

    On declining production, that was (MUX)'s announcement (that sent stock down & me getting burned). That may be specific to their situation.

     

    With the steep rise in last few years over "end of the world" worries, that $1000 level (I just saw suggested), feels more right to me to take the air fully out.

     

    Still shorter term it seems odd for worries about end of QE to prompt lower gold prices, instead of higher to offset possible rate increases, & general stress about all the economic messes. I'd expect some increase after initial QE-talkoftapering shock wears off here. Not sure if it would go back down again, before the longer term sideways & eventual up.
    22 Jun 2013, 12:13 AM Reply Like
  • Great points southgent - good discussion amongst knowledgable people is very important because it allows the best ideas to come forward.

     

    Very interesting point about what happens when idle cash starts earning more income - will it not benefit government revenues? I'd respond with a couple of things

     

    1) if rates rise to 5%, debt is still almost double idle cash, so at minimum it would simply slow the budget deficit increases.

     

    2) Only a percentage of this increase in interest would benefit government revenues. If 10 trillion earns 5% that makes $500 billion, but the tax rate would mean only 30% would be added to revenue. So realistically only $150 billion of revenue would be associated with the new interest rate, while the govenrment would bear the full burden of the 5% rates on the $17 trillion debt - an $850 billion hit.

     

    3) Finally, and most importantly, that increase in interest rates would mean income for ZIRP deposits but it is coming from the pockets of banks and debtors - this is not new money from outside the system. So even as savers benefit, debtors will end up paying more so it could be argued that it would be a redistribution of money, not new profits.

     

    But it does get complex and I think even the most sophisticated PHD models probably differ as to the consequences - so we can onyl theorize here.

     

    But for the reasons mentioned, I think there is much more harm to rising rates for the government than benefits.
    23 Jun 2013, 10:13 AM Reply Like
  • SG & Heb:

     

    Just to interject one note of reality in the "rising rates" discussions that have take over the universe, as yields rise in panic mode and related investments go the opposite direction at similar speed:

     

    Rates aren't going to drive anything. They are not the independent variable; they are the dependent variable, that dependency being demand. Unless we see some sustainable increase in monetary demand, driven by a noticeably better performing economy, any continued increase in interest rates will simply be unsustainable.

     

    Saying that higher rates will improve the lot of savers and, ergo, will enhance their spending abilities and improve the economy, has the horse behind the cart. It's only if the economy improves and a liquidity shortage starts to appear that banks will elevate the rates paid to depositors to try to enhance their depository base. Such rate increases already presuppose an improved economy; they don't cause it.

     

    The impending shape of the yield curve in going to be far more dictated by the impending Q2 reports and outlooks than by any recent hysterical selling of all yield-related bonds and other investments. Meanwhile, savers better not be holding their breaths from suddenly elevated rates on deposits, simply because the liquidity overload is still enormous.
    23 Jun 2013, 10:46 AM Reply Like
  • Good point tack - i'd also like that rising rates mean losses on existing bond-holdings. Long-term investors may not care, but a large part of the market is investors not interested in holding until maturity. The people who bought 30-yr treasuries at 3% have no intention to hold to maturity - they bought those bonds as a safe-haven or stop-gap investment. If these investments rise to 4% they will experience significant losses.

     

    I think this recent rate rise is quite alarming because I do not think it was the Fed's intention.
    23 Jun 2013, 10:57 AM Reply Like
  • Author’s reply » Guys

     

    In learning all this good cop, bad cop outcome of rates rising. I have a hard time swallowing fast rising rates having any good impact for our investments.

     

    I am reading both arguments but I am in the camp that artificially low rates caused the stock market to go high, so the reverse (higher rates) will have the opposite effect which will cause lower equities.

     

    Just my 2 cent's and gut reaction..
    23 Jun 2013, 11:02 AM Reply Like
  • IT:

     

    The recent few days' panic isn't good or instructive for anybody. beyond that, history does not support your contention that equities and rates are inversely related, if and until such time that rates get very high, and the yield curve gets compressed.
    23 Jun 2013, 11:40 AM Reply Like
  • Author’s reply » TACK

     

    History will be written by QE'S being fused into the markets. Mark my words !!

     

    NOTHING, and I mean NOTHING, can be compared to what they will cause . Examples of prior hysteria never had capital infusion to prop up the markets.. If I am wrong in a year I will man up. So well see.
    23 Jun 2013, 12:01 PM Reply Like
  • IT:

     

    If you already have everything figured out (exclamation points and caps included, for emphasis), then, you don't need a blog. Just prepare for the end of the world, a much better endeavor.
    23 Jun 2013, 12:16 PM Reply Like
  • Hebba: Depositors are not likely to see any meaningful increase in rates for as long as ZIRP remains in effect, and the federal government will still be borrowing huge amounts at near zero. The yields on the 3 month to 1 year T bills have not budged during the recent increases. It is important to make that distinction.

     

    1-Year Treasury Constant Maturity Rate (.12%)
    http://bit.ly/14qXseZ

     

    The rates that are rising now are intermediate and long term rates, impacting negatively bond investors rather than impacting positively risk free investments like savings accounts and MM funds. I would anticipate that the federal funds rate will not rise until late 2014 at the earliest and the increases after the first rate increase will be at a far slower pace than June 2004-July 2006.

     

    So, anyone who actually has a sophisticated model would need to plug that scenario into the government's interest rate costs and the future positive impacts on tax revenues resulting both from the taxes on that interest income and the positive impact on GDP due to increased spending derived from that income.

     

    I previously mentioned that one model predicted that the current low interest rates have lowered GDP by 1.75% and cost 2.4M jobs compared to the 4.93% average rate on risk-free savings in the past nine recoveries from recessions.

     

    http://bit.ly/YF81Ij

     

    I also mentioned that the U.S. deficits are improving due to a variety of factors. Goldman Sachs predicts that the budget deficit as a percentage of GDP will shrink from a 12% high in 2009 to 3% in fiscal 2015 ending in September 2014:

     

    Graph at Washington Post:
    http://wapo.st/1908FJJ

     

    As to debtors, a large percentage of households have already refinanced their 15, 20, and 30 year mortgages at abnormally low rates, lowering their debt service costs to disposable personal income to historic lows (almost 16M mortgages have been refinanced just by Fannie and Freddie, and almost 1/3rd of homes are owned free and clear)

     

    The households that have already refinanced are not the losers in the coming reset of rates at higher levels, but the owners of that paper.

     

    Instead, consumers in the aggregate are now in a better financial position to spend and to save than at anytime since 1980 as shown by the FED's DSR and FOR ratios, providing a long term impetus for U.S. GDP growth fueled by consumer spending of disposable income rather than spending derived by increasing their consumer debt obligations which was the case between 1985-2007.

     

    DSR Chart:
    http://bit.ly/MiNM1D

     

    FOR Chart:
    http://bit.ly/WnYXvw

     

    Household Debt to GDP:
    http://bit.ly/X6wZju

     

    Their disposable income will increase further as wages increase and they start to earn a normal return on their savings.

     

    One beneficiary of this positive new long term secular trend will be the federal government's tax revenues, as real GDP increases due to consumer spending financed out of increases in disposable income, but consumer debt deductions on their federal tax returns are at much lower levels long term.

     

    I would note also that a ton of that federal debt is held by SS trust fund, etc. and higher interest payments are really nothing more than intra-government transfers. SS trust fund would have more money.

     

    http://1.usa.gov/14qYtne
    23 Jun 2013, 01:00 PM Reply Like
  • Author’s reply » TACK

     

    So I guess when someone doesn't agree with you then you just talk down to them eh?

     

    Sorry, neither one of us have it figured out and if you think for one minute I would stop a blog and "prepare for the end of the world" as you put it is uncalled for, arrogance is unnecessary unless that's your personality.

     

    I tried to play nice with your comments and opinions. Some of them are uncalled for when another point of view is taken.

     

    But I won't remove anything you say, let the readers decide as I see you seem to not respond when someone does question you eh?
    23 Jun 2013, 01:15 PM Reply Like
  • @ IT

     

    You've stated your views with a great deal of enthusiasm :).

     

    I've been appreciating the exchange with Tack, SG, Hebba & you want to read more of everyone's thoughts. No one has absolute answers, but the more facts & concrete logics presented (& a lot have been here), the easier it is for me to form my views.

     

    @ IT - I didn't fully understand your comment. "QE fused into the market"? Are you referring to ending (tapering) of QE?
    23 Jun 2013, 01:28 PM Reply Like
  • Author’s reply » @CURLS

     

    It is my belief that QE'S had a dramatic increase in the markets going up. Others agree while we have some who feel they had no effect. That after announcing they will be tapering some suggest it is just hype and nothing more.

     

    Everyone can decide and judge for themselves what the final impact will be. I am in the camp that this ending of QE will not be an easy one. But I get chastised for printing it!

     

    That's fine because everyone is entitled to their opinion and expertise. I just don't see this as good news for people retired or retiring soon.

     

    If I came off to harsh for some I do apologize. But even I have my limits as well. So in order to cease the negativity in posts I will extend my apology and let's get back to the discussions.

     

    Enjoy the day everyone.
    23 Jun 2013, 02:06 PM Reply Like
  • curls

     

    (MUX) reduced planned production and therefore is going to save a lot cash right now with gold prices going down; otherwise the company has enough cash for current production and no debt
    23 Jun 2013, 05:02 PM Reply Like
  • hebba

     

    A 1% rise in interest rate is = to about 10% loss in principal......that wouldn't be a significant loss definition for me ...after all markets go up and down
    23 Jun 2013, 05:17 PM Reply Like
  • IT
    Corporation stocks buybacks also raise markets by an estimated 3%-4% artificially
    23 Jun 2013, 05:23 PM Reply Like
  • @ Rina
    True that was the announcement they made. It counts as a decision to produce less gold.

     

    Interesting on the corporate buyback raising markets by that much.
    23 Jun 2013, 07:05 PM Reply Like
  • Rina - it depends on the duration of your bonds. A 1% rise in rates for a 30-year bond is different than for a 5-year - whats the duration for your bonds?
    23 Jun 2013, 08:12 PM Reply Like
  • Hebba

     

    I don't have any bonds but will reconsider if bond rates reach 6%-7% and our gov't doesn't go broke before then
    23 Jun 2013, 09:01 PM Reply Like
  • Hebba: The simple rule of thumb is to multiply the duration of a bond fund or a bond by the percentage increase in rates.

     

    Duration—What an Interest Rate Hike Could Do to Your Bond Portfolio
    http://bit.ly/15yDEeq

     

    One of the longest duration ETFs, ZROZ at a 27.44 duration, lost 18.22% of its value between 5/1/13, while JNK with its 4.59 year duration lost 5.64% unadjusted for monthly dividends which would lower slightly that loss.
    23 Jun 2013, 10:02 PM Reply Like
  • south

     

    thank you for explanation
    24 Jun 2013, 07:02 AM Reply Like
  • Hey, I just discovered if you rollover a stock symbol in (XXX), it gives the company name! Finally!

     

    Meanwhile every time I see (RAD), I think Radio Shack, not Rite Aid.
    20 Jun 2013, 08:06 PM Reply Like
  • Author’s reply » @CURLS

     

    Ever wonder why I was pushing the brackets? Maybe that was the day you had your mmmmmmm's issue ?

     

    Personally my Rite Aid stinks .... CVS gives much better customer service. But then again with all my expensive meds they should build a wing for me !
    20 Jun 2013, 08:50 PM Reply Like
  • BTW, IT, my mmm's are much better. Now my p&qs?
    I'll let you be the judge of that.

     

    Rite Aid is crummy by me too BUT they've been improving. There's definitely a lot of pieces coming together better. I now think of it as a place to stop into. CVS is easy, convenient, carries everything - and way too expensive on non-pharmacy. It's my option of last choice when I can't get somewhere cheaper. Walgreens is the only one with the toothbrushes I like.
    21 Jun 2013, 12:34 AM Reply Like
  • Author’s reply » @CURLS

     

    Got a little hot under the collar today on a post eh? I have been there before..lol

     

    You held your p&q's just fine !!
    21 Jun 2013, 12:38 AM Reply Like
  • Author’s reply » A quote from Tom Luongo from one of his articles....His quote.

     

    " I'm even more convinced that things are unraveling now after tonight's Fed monetary statistics release. I'm putting together a new article now to discuss this."

     

    For those who look at this info any thoughts?
    20 Jun 2013, 08:57 PM Reply Like
  • For experienced posters - on the market today - I have questions:

     

    - For stocks that went down much less than average, are they likely to do well in the near future? Rise more on rise days, drop less on drop days? It's always individual of course, but have you seen a pattern?

     

    - The reverse for big dropping stocks? Do they tend to tank more & more? I've noticed already for (INTL) it's not true, it was on the most down list yesterday, but today didn't move much.

     

    - Can someone explain what's making treasury yields go up? Is someone moving into them? And what's happening with bonds? Are investors moving into them or out of them & what are the triggers? I'm finding it hard to follow that markets ups & downs in current days.
    20 Jun 2013, 09:03 PM Reply Like
  • Curls:

     

    Personal observations: usually the stocks that are the strongest during a correction are the strongest during the next up leg.

     

    The same principle applies to weak stocks. Meaning that they will usually underperform during the next upleg.

     

    You also have the crazy stocks :-) that will be wild during bull moves and wild during bear moves. (DANG) is one of them.

     

    Krustyman
    20 Jun 2013, 10:19 PM Reply Like
  • Thanks Krusty :-) !

     

    Plus from your answer, I learned "strong" is the much shorter way to say "went down much less than average" :).
    20 Jun 2013, 10:50 PM Reply Like
  • Curls:

     

    LOL! :-)

     

    Krustyman
    20 Jun 2013, 11:39 PM Reply Like
  • Curls:

     

    Three words for Bonds:

     

    Interest Rate Normalization
    20 Jun 2013, 09:56 PM Reply Like
  • @South

     

    Hum, ? Okay that's the consequence (of long term rates, short term is stuck tied to ZIRP). Hurray.

     

    What's the process happening? Who's moving, and where are they going, & why -- bond-wise? Best guess?

     

    From an article: "traditional methods of controlling risk won't necessarily work this time around. Bonds often provide protection against downturns, but lately, they've actually dropped more than the stock market."

     

    That's what's making this hard to follow. Usually rates & bonds move gradually, & fairly independently of what equities are doing. No mass moves between one to the other within hours.
    20 Jun 2013, 10:01 PM Reply Like
  • curls

     

    About stocks-- actually my stocks did not do too bad; (http://bit.ly/IIcNQc), nitrogen fertilizer, I hear is not directly correlated with the market but with the weather and growing season; I have been moving my mining stocks money in so called safety stocks like (http://bit.ly/14NbaLf)... (http://bit.ly/vHsqn5) and (http://bit.ly/xnZs4N) I have owned a long time and only PM took a beating but I don't think is market related; I was lucky enough to move my mining stocks (owned for a while) before the major fall out but I still have exposure
    20 Jun 2013, 10:16 PM Reply Like
  • Rina,

     

    if you like the fertilizer space - take a look at (UAN) , Its an MLP , down with general selloff and weakness in MLP sector.. Yields 10% at this price .. I 've owned it in LT accounts for a while.. I added more yesterday.. Sets up a nice risk/reward from here..
    21 Jun 2013, 08:50 AM Reply Like
  • FG

     

    Thank you for the advise; yes I used to own (UAN) but sold (at a profit) when Icahn , the corporate raider, showed up...I did not want take any chances with the gains and then I got (TNH)
    21 Jun 2013, 09:48 AM Reply Like
  • Intermediate and long term bonds price have not been determined by a free market since the FED first launched QE.

     

    The market is now starting to price bonds based on a return to free market conditions by the second quarter of 2014, "rate normalization", the probable end date of QE.

     

    Rate normalization is simply market based interest rates free of Fed interference.

     

    ZIRP impacts the short rates like the T Bills (3 month to 1 year) and to a lesser extent the 2 year treasury note.

     

    Forget about ZIRP for a minute. That policy is not relevant to the carnage in bond land now.

     

    Look at this chart of the 10 year treasury and ask yourself this question.

     

    Is the 1.66% 10 year treasury yield on 5/1/2013 normal?

     

    http://bit.ly/WGQM6i

     

    The FED has driven treasury yields to abnormally low levels based on its buying binges. The process of interest rate normalization will take yields back to normal levels set by the market rather than by the FED.

     

    A normal 10 year treasury yield would be in the 4% to 4.5% range with an average inflation forecast of 2% to 2.10% and that is what investors now predict as the average annual inflation rate for the next ten years. Bond investors will lose a lot of money through rate normalization unless they sell now and they are starting now to cram into the same exit door. The smart institutional money sold at 1.66% in early May.

     

    Since May 1, the 10 year Treasury has moved from a 1.66% yield to 2.41% today:

     

    http://1.usa.gov/oLC2C9

     

    It is important to note that the rise in yields is occurring in a period where inflation expectations have been declining so opinions about inflation are not behind the rise in yields without question.

     

    Where is the money going? It is going to the same place where trillions are now resting and doing nothing in particular: money market type instruments paying nothing. I suspect that there will be a movement back into stocks, hopefully before too many individuals get scared senseless by what is happening now.
    20 Jun 2013, 10:17 PM Reply Like
  • @South

     

    Thank you. Now that you say it, it's makes sense. Tapering talk, means normalization will come (eventually) to rates in 2014-15 which is higher than now... so time to leave is now or yesterday, before everyone else leaves bonds & their unusually low rates.

     

    I imagine some bond funds have grandfathered in decent longer-term rates from bonds bought before nowadays.

     

    So it's going now to cash. As has money from anything with a yield that swelled, like REITs, BDCs, junk, foreign bonds. Has it been flowing into dividend stocks since the bond downturn -- and now moving out of them with the rest of equity downturn?

     

    @Rin

     

    Glad to hear it wasn't bad. Thanks for the info on what's holding on better.
    20 Jun 2013, 10:31 PM Reply Like
  • Curls: Net asset value per share will go down for bond funds as bond prices decline, irrespective of the price paid for the bond and when it was bought.

     

    Over the past few weeks, the net unrealized gain for many bonds has probably disappeared altogether and those funds are now sitting on net unrealized losses.

     

    Money is moving out of risk assets and most likely into holding ponds earning nothing.

     

    I have a minor and negligible position in one equity REIT common stock at the moment. I sold my other negligible position, 100 shares of Duke Realty at $17.25 last April and DRE closed at $14.7 today, down 5.41% for the day and 14.78% in slightly more than two months. So I will take a look at that one tomorrow or possibly next week, along with some others:

     

    1. Sold 100 DRE at $17.243-Roth IRA
    http://bit.ly/11Qnab7
    20 Jun 2013, 11:02 PM Reply Like
  • Author’s reply » @CURLS

     

    "So it's going now to cash. As has money from anything with a yield that swelled, like REITs, BDCs, junk, foreign bonds."

     

    Check TACK and MY comment on the BDC'S... (PSEC) held up well and people really do not understand them thoroughly. I posted a quote on them!!

     

    I think it was in Chapter 12 !!
    20 Jun 2013, 10:58 PM Reply Like
  • @ SG

     

    So NAV goes down on bond fund, regardless of what bonds held, based on whether the fund is bought into or not? So NAV is based on share price, not assets in the fund? ....Oh wait a sec I know, NAV based on assets at discount/premium prices? Which went down/discount because rates went up.

     

    @ IT

     

    I did see your comments about (PSEC) & BDCs holding up. Last downturn they took a hit. So it sounds like people are beginning to understand them now? Or maybe this sell off was a different class of investor?

     

    11:30pm Futures are green: ....Dow +49, S&P +5, Nasdaq +7
    20 Jun 2013, 11:18 PM Reply Like
  • Author’s reply » @CURLS

     

    (PSEC) did take on more debt a while back, so a few people I trust got skittish and sold. I am going to post a PM from a big investor I trust and his opinion on the markets..

     

    "On PSEC, my S&P model says we are in an S&P price corrective phase. The model also indicates we will have multiple ups and downs for a while. The FED talked about tapering QE and eventually turning it off. In the past, the markets started to react to the talk, and did not wait for the event. So I expect downward pressure from that starting yesterday. When the FED stops buying T-Bills, the yield has to go up. That should also pressure stocks down somewhat. China has apparently entered a liquidity crisis. That will likely force people into dollars. The EU is going deeper into recession, and the Greek and Cyprus situations are heating up again.

     

    All in all, I think the markets are going to go down, and I think PSEC will also slowly go down.

     

    Right now I might start buying below 10, but that might change with time. My model warned me about the correction before it happened, and as a result, I got out high. I was just lucky that the QE taper announcement did not precede the sell signal or I would have gotten burned. If you go into PSEC when it's priced high, you will get less shares than going in when it's priced low. That's what I am waiting for. However, under the current conditions at PSEC, I will likely not own as much of it as I did in the past. "
    20 Jun 2013, 11:26 PM Reply Like
  • This is why bonds keep befuddling me.

     

    From an article "traditional methods of controlling risk won't necessarily work this time around. Bonds often provide protection against downturns, but lately, they've actually dropped more than the stock market."

     

    Usually Bonds move irrelevantly from stocks (often opposite). They change rates somewhat slowly. People in bonds, don't jump to stocks to get a yield. They gain owners when safety is wanted. They aren't effected by the gov't buying them. So, I keep slipping into picturing this, their traditonal stoggy role & getting knocked off center.

     

    Treasuries - there's a flood away from them at currently set rates in anticipation that rates will go up. So less people interested, causes prices for them to drop (sell at discount on 2ndary market) & rates to go up? Doesn't the treasury set the rate? Are gov't set rates normally a reflection of inflation? Sorry if these are very elementary questions.
    21 Jun 2013, 12:49 AM Reply Like
  • Curls,
    Historically the market has set the rate. It is only since the FED interventions since 2008 that the rates have been government controlled. The FED has historically set short term rates via the FED funds rate.

     

    Soooo, all of this will have to be unwound (go back to the market setting rates again) as the FED pulls out. I personally see this being a slow process over years.
    21 Jun 2013, 09:34 AM Reply Like
  • Hello all:
    I thought it timely to give reference (see below) to two very recent articles that nailed the current avalanche of selling before-hand that we have seen yesterday and today june 20. These two guys virtually nailed it and are on record.

     

    My two cents though is this:

     

    What was the "safe haven" yesterday and today? Answer: other than having been short, there wasn't one that you could have been in (except a few stocks that were exceptions). Cash, was only safe place to be. Today's sell off was not just the stock market. It was stocks, bonds, real estate (IYR), PMs, commodities and foreign currencies. How is this different from a "regular" correction? Normally money would flow from stocks and go into Treasuries, and TLT. This knee-jerk reaction did not occur of course as the trigger event was Ben Bernanke throwing a monkey wrench into the machinery of the market, or wait this is better, "peeing in the punch bowl".

     

    There is a word that applies when everything goes down and cash goes up: Deflation.
    If this continues, that will be the word to describe it. Robert Prechter noted that in the US major depressions and recessions are usually initiated by a market crash. If this becomes contagious to other markets it will not be good.

     

    I know there is a ton of stuff to read, but try to take time to look at these two articles.

     

    Dave Kranzler, June 15. If the Fed Tapers It Risks Triggering a Stock Market Avalanache...
    http://bit.ly/124jAg4

     

    Joseph Stuber, June 11. The Paradigm Shift Has Begun - This Isn't Going To Be Pretty
    He correctly nailed, that cash would be the only "safe" asset (other than being short).
    http://bit.ly/124jAg7
    21 Jun 2013, 12:52 AM Reply Like
  • Author’s reply » @JOHN

     

    Thanks for the post. I had read Stuber's article but not the other one. It is a very timely piece for all to read..

     

    Glad to see you again, deflation is why BB had that drink of water right before his speech. I will never forget that . It is a sign of nerves, drinking before speaking. HE had plenty of time for a water bottle before coming on stage. It was the words he HAD to say that were haunting him!!
    21 Jun 2013, 01:03 AM Reply Like
  • Mr Wilson,
    I had read both articles previously. The big problem I saw with both articles is they only address the markets. There has been trillions of dollars sitting in savings accounts, money market funds, CDs, etc. since 2000 essentially earning nothing. Why? Mostly because of demographics. The boomer generation has reached the point where they can not afford to take a hit on principal. The depression and WW II generation before them don't think that way. They would have no problem sticking the cash or gold/silver in their mattress or burying out in the yard. They know what it is like to wake up one morning to find out that everything is gone.
    Short version is since 2008 a whole lot of Americans have become risk averse because they have reached the age where they don't have the time left to make up losses. And, they see the direction that everything is headed.
    The reason I understand this so well is because my wife and I are kind of the in after boomer generation (1957-1960). We had depression era parents and know all too well the stories from back then. Like I said in a previous post, the only way my wife would agree to my going back into the stock market was to set up a savings account with 6 months worth of expenses in it. We have no debt of any kind. I get an allowance for what I can, as she puts it, "play with". She doesn't care about keeping up with inflation, she cares about having the money available any time she wants to get her hands on it. I can honestly say if was not for FDIC insurance on the bank she would keep the cash in a lock box at the house.
    And, unless things really turn around in the economy this mentality will only get worse over the next 30 years. Because they see themselves as being punished for not going into debt and saving their money. And, what they do have is being taken away to pay for those that don't live responsibly. All the while they see their purchasing power drained away with inflation. Which makes them even more risk averse.
    21 Jun 2013, 07:32 AM Reply Like
  • John: It is normal for a bear to declare victory after the market goes down a few days while ignoring how much it has gone up since March 2009 or since the year of my birth when the S & P was hovering around 20.

     

    Excluding the last decline from the recent all time high, the S & P 500 has had four dips since March 2009 measured at -15.99%, -19.39%, -9.94% and -7.67%, but has gained 146.7%.

     

    Doug Short Website: Third Chart:
    http://bit.ly/nJLfB3

     

    After hitting a recent of 1,669.16 on 5/21/13, the S & P 500 has declined 4.8% after reaching that all time high last month.

     

    I am not predisposed to being bullish or bearish.

     

    I did have an exchange with Mr. Stuber in the comment section to his last article.

     

    http://seekingalpha.co...

     

    I quoted from a previous article published in November 2012 that simply highlighted his erroneous prediction made at that time, which he acknowledged, and also quoting his statement claiming that the S & P 500 was then in a bear market.

     

    He then said something which I thought was noteworthy about his predictions:

     

    "if my longer term call turns out to be right and we do re-visit the 2009 lows this year maybe I will be redeemed"

     

    Comment at June 7 at 7:28 P.M.

     

    I then responded with this comment:

     

    "Joseph: I thought that my eyes were deceiving me. Did you say that the market is going to revisit its 2009 lows this year?"

     

    On March 10, 2009, the rally started after the S & P 500 closed at 676.53:

     

    http://yhoo.it/11RD0Sc

     

    The low for 2009 was 666.79 hit on 3/6/2009.

     

    We shall see in the fullness of time. Eventually, those who are constantly predicting disaster will have their moment in the sun.

     

    However, I would note that the annualized annual return of the S & P 500 from 1/1/1951 to 12/31/2012 was 6.95%, Adjusted for Inflation, and with dividends reinvested. Without the inflation adjustment, the annualized return would be 10.74%.

     

    My goal is to achieve a 6% annualized real return in my taxable accounts after taxes using bonds, stocks and cash.
    21 Jun 2013, 07:50 AM Reply Like
  • As an aside, when she saw that the market dropped 350+ points yesterday she asked "How much did we lose?"
    I replied "Everything"
    She replied "I'm not surprised." And, went on about her day.
    21 Jun 2013, 08:08 AM Reply Like
  • It would be appropriate to add that Mr Stuber has been calling for a crash since last year.. has been totally wrong on this market and is calling for us to visit the S & P lows this year ...

     

    I''ll be diplomatic and kind and leave it at that

     

    Caveat Emptor on his commentary
    21 Jun 2013, 08:54 AM Reply Like
  • South ,,

     

    I commented above on Mr Stuber.. You correctly confirmed my assesment of his market commentary..
    21 Jun 2013, 09:01 AM Reply Like
  • F & G: Now, I am not saying that we will not decline to 666 before year end.

     

    It is conceivable that China and most of Asia will fall into a previously unknown sinkhole and disappear.

     

    Maybe a meteor will hit the U.S. and turn our fair nation into a big moltened rock, making the Tunguska blast look like damage caused by a firecracker.

     

    Rock samples suggest meteor caused Tunguska blast
    http://bit.ly/12ZAhfW

     

    For some reason, I do not try to manage my portfolio based on those scenarios, but I have to admit one thing.

     

    I do ask myself occasionally whether the rally off 666 is the Devil's Work, just sucking us into a potential pit of death, destruction and mayhem. I have finally resolved that particular concern this morning after checking the data again. The S & P 500 did not bottom at 666 but at 666.79 and the Bible clearly states that the Devil's mark is 666, not 666.79.
    21 Jun 2013, 09:14 AM Reply Like
  • South,,

     

    thanks for the morning chuckle :)

     

    I have seen your comments regarding the 666 print since it was brought to your attention by Tack..

     

    I will admit the 666 number is etched in stone in my brain since the day it happened.. However I try to take Tack's approach that the devil 's work was aimed at those who fled for the hills and never had an opportunity to at least get back to even..

     

    Maybe I can convince you to take that approach :)

     

    Sadly I live with those thought every now & then because I witnessed first hand, folks that had their financial fortunes changed forever , most in their late 50's early 60's ..
    21 Jun 2013, 09:26 AM Reply Like
  • Author’s reply » @NOTRUB

     

    No bat swinging or getting hit on the head with a wooden spoon?
    21 Jun 2013, 10:29 AM Reply Like
  • Author’s reply » @F&G

     

    The Devil did not use decimals. He was a rounding type of guy. Just sayin ...

     

    He would take 10 souls. Not 10.4 :)
    21 Jun 2013, 10:31 AM Reply Like
  • Author’s reply » Gold is up over $1300 already. THE FUTURES ARE ALSO UP AS WELL.

     

    Calm before the storm maybe??
    21 Jun 2013, 02:49 AM Reply Like
  • IT "Gold is up over $1300 already. THE FUTURES ARE ALSO UP AS WELL.

     

    Calm before the storm maybe??"

     

    No because of this:
    http://on.wsj.com/13XymoS
    21 Jun 2013, 07:59 AM Reply Like
  • IT

     

    I saw headline on ZH last night that the CME has raised margin by 25% on gold but I need to verify; it wouldn't surprise me at all since people will be buying more physical with price drop
    21 Jun 2013, 08:08 AM Reply Like
  • Author’s reply » @RIN

     

    Hasn't this been in the playbook for years now? Curb the sales if possible to keep suppressing the price. Why now add a margin raise if the commodity is priced correctly?

     

    Or do we need to manipulate the buying again...Just sayin.

     

    I know, I know, The markets aren't manipulated. QE just had no effect on anything huh?
    21 Jun 2013, 11:40 AM Reply Like
  • IT

     

    In my opinion, margins are raised to discourage people to buy for delivery more physical now that gold prices went lower
    21 Jun 2013, 12:51 PM Reply Like
  • I could be wrong, but, aren't margins only applicable when using borrowed money to purchase stuff?/?
    21 Jun 2013, 01:01 PM Reply Like
  • Not,,

     

    Precisely and that's the issue,, also, margin requirements increased because of volatility...

     

    21 Jun 2013, 01:06 PM Reply Like
  • Correct but for future markets I think you have to place more cash in account, I am not 100% sure but that's the way I read it...maybe someone can correct me
    21 Jun 2013, 01:12 PM Reply Like
  • Author’s reply » @RIN

     

    That is my understanding. So if you want to *borrow* money to buy the metals in anticipation of higher prices ahead you gotta pay a bigger vig !!

     

    Maybe volatility to the upside is controlled this way?
    21 Jun 2013, 01:23 PM Reply Like
  • Rinascimento:

     

    You are correct. The margin requirement is the amount of cash you have to put as collateral before being allowed to buy a contract on the futures market.

     

    Krustyman
    21 Jun 2013, 02:05 PM Reply Like
  • krusty/IT
    thank you
    21 Jun 2013, 02:39 PM Reply Like
  • So if you want to buy into safety through gold -- you can borrow on margin? Yep, that's a plan.

     

    I sure hope they're short term traders betting on an increase.

     

    So if I follow, the point is to increase the collateral requirements on the margin for gold because of greater risk due to more volatility. This in turn keeps the buying more subdued...which keeps the gold price lower / less volatile than it would be otherwise.
    21 Jun 2013, 05:23 PM Reply Like
  • Author’s reply » @CURLS

     

    That is my thought and these margin increases happened monthly, in fact almost weekly a few years ago to tame the price down!

     

    But don't use the word manipulate the price. NO, it was done to control the volatility (SARCASM). Which I always thought the stock market was all about. Buyers and sellers. Until the buyers are more plentiful then the rules changed !!

     

    This isn't anything new they are trying. Wash , rinse, repeat !!
    21 Jun 2013, 05:39 PM Reply Like
  • I was reading this article this morning http://bit.ly/16lvbrj and it occurred to me that historically haven't markets always returned to the mean after governemnt manipulations have been removed?

     

    What I am asking is that everything has a historical average that it plods along at bar any events that take it one way or another. But, in the long run it eventually returns to this long running average. With the removal of FED intervention, which I expect to take years, wouldn't markets return to their historical averages say for interest rates, prices, P/Es. etc.?
    21 Jun 2013, 08:31 AM Reply Like
  • Notrub: He is one of the authors at SA that I will ignore in the future, particularly after reading his comments to me about JNJ's P/E multiple and his version of how TIPs were priced by investors.

     

    There are a large number of SA contributors who have strong opinions about a variety of subjects, without having much, if any, factual foundation to back any of them up. There is also a great deal of attention focus on matters that I view as insignificant and even irrelevant based on my experience which is now in its 4th decade as an investor. I would be curious to see how they actually do with their own portfolios. I know how I am doing.

     

    All of us have to deal with unknowns and unknowables when managing our money.

     

    For some time now, I have viewed it as probable that the FED will taper its asset buying starting in the fall and will end QE no later than the 2014 second quarter with the first increase in federal funds coming sometime in 2015. Further, I expect the rise in the federal funds rate to be far slower than the June 2004-July 2006 period when the FED raised that rate from 1% to 5.25%. Sometime in 2016, I would expect the federal funds rate to return to 1%.

     

    With that forecast, I plan now, taking into consideration that I am dealing with possibilities and probabilities when making any future forecast. Given that uncertainty, I will not go all the way with my positioning based on a more probable than not prediction, but instead will weight my positions accordingly.

     

    So with my future forecast about bonds (summed up with the phrase "interest rate normalization"), I did not sell all of my bonds and bond funds, recognizing that my future forecast may end up being wrong.

     

    I did reduce my bond allocation by several percent and shifted it around some (e.g. selling all of VFICX which I had owned since 2009), plus I significantly reduced the duration of my individual bonds.
    21 Jun 2013, 08:51 AM Reply Like
  • South,

     

    are u leaving me out there alone to take on "James" all by myself ? - LOL
    21 Jun 2013, 09:30 AM Reply Like
  • Notrub

     

    yes, I go by historical data and what they mean; some example are that markets were in bear market cycle in mid 1960s to 1982 when the Dow/gold ratio reached 1; the bond market was in a bear market also; after 1982 , the bond and stock markets were in bull mode and still going on today with some corrections here and there; this bear and bull markets are like countercyclical- when financials are in bull mode, commodities are in bear mode and vice versa; very subjective interpretation for different people but that's what I go by; yes, markets tend to revert to their mean in such cycles when in a commodity bull market prices do up while in a bear market prices go down but adjustment about inflation must be made
    21 Jun 2013, 10:24 AM Reply Like
  • F & G: Sometimes, people want to make investing a lot harder than it needs to be by focusing their attention on extraneous issues.

     

    How difficult was it to go up to the mountain top, clear one's head, take a deep breath and survey the terrain in March 2009? What would an investor see?

     

    1. The financial system had been saved by massive interventions by governments around the world and their central banks.

     

    2. Stocks were cheap. There is a tendency to project the immediate past into the future as if nothing good will ever happen and disasters are the new normal.

     

    3. The Fed had already launched ZIRP in December 2008 and went into QE overdrive on March 18, 2009. Admittedly, it would help to know what happened in the stock market in 1933-1937 when the FED last launched QE.

     

    What else did anyone really need to know? Was it really that hard to reach the same conclusion in 1982, based on the FED's successful taming of inflation, the computer revolution and valuations again, or in 1999 just based on nothing more or less than valuations?

     

    I wrote a post in March 2009 on the bear mentality and will simply drag and drop the relevant discussion here:

     

    *********
    Quote March 2009 Post

     

    There is a common valuation technique in a bear market, which I will describe with a phrase: "It is bad and it is never going to get any better". The here and now, what is happening this minute and day, becomes the best forecast for as long as a human can see, which is not very far. Maybe it is due to the slow motion effect of real time living, where days seem long and a year becomes an eternity when one dwells on the passage of minutes or days rather than the ebb and flow of history in the minimum unit of years. Generally, somehow and someway, the economy sinks and then prospers, then sinks and expands again. Ultimately, it is foolish to extrapolate the present into the indefinite future. This is sort of obvious looking back at a few centuries, but you would never know it based on how investors value companies based on a year or two of declining earnings caused by the latest in a long series of economic calamities. Maybe it is due to an incomprehensible inability to "remember" much of anything that happened more than a few minutes ago.

     

    It is sort of affliction of the human race, always predicable, to forecast the present condition into the indefinite future. Understanding investor psychology is always important, which is one reason why I read Professor Schiller's book Irrational Exuberance as soon as it was published in 2000.

     

    So now, after a bad year in 2008, and another one likely in 2009, it is going to be bad until the end of days, so turn back the clock fifteen to twenty years or more when valuing a company. Is a single company in the world going to survive, seems to the prevailing sentiment? Knowing that this is likely to happen in a major bear market that may last say 18 months, the prudent investor who is not stuck perpetually in the present probably needs to anticipate the madness of crowds, duck, squirrel away some money, and wait for the sun to return, or at least a better entry point for a long term hold. Otherwise, the more sensible ones will just be trampled by the thundering herd. For some companies, managed by the arrogant and ignorant, though highly compensated and rewarded for failure, the sun will never return and they will be relegated to the dustbin of history by the downturn. Leverage does work both ways in case anyone needs to be reminded.

     

    Most major companies will survive and prosper during the next upturn. Many of these companies are now traded at levels prevalent in the early 1990s or even 1980s, as if nothing has transpired in the last twenty years, or at least nothing good. I have mentioned several that I have recently purchased with strong hands and a long gaze into the future.

     

    http://bit.ly/13tPWk0
    21 Jun 2013, 10:38 AM Reply Like
  • South

     

    well stated , but many did not go to the mountain and come up with that conclusion,, far too many went up there and followed the lemmings into the sea..

     

    They uttered your words as they went up there.. "It is bad and it is never going to get any better"

     

    Im no genius , but when i heard the word "never" in the dialogue back then, I poked my head out of my bunker , realized it didn't get cut off , then I started to nibble.

     

    In retrospect , i wish i would have had more conviction then , but shoulda coulda, woulda , is not part of an investment strategy going forward.

     

    Just use these examples as a learning experience going forward.. Emotion is not part of an investment strategy either.
    21 Jun 2013, 11:50 AM Reply Like
  • Thanks for the response SG.
    I guess what I am really mulling over is that the foreseeable future looks like to me a series of ups and downs but essentially trading sideways while the FED does whatever it decides to do???

     

    Though the one wild card I haven't gotten into perspective is China. Mainly because their data is even more untrustworthy. With their clamp down on lending, then about turnaround today it seems that everything is not rosy in Dragonland either. Which in my mind causes worry as to real world economic health.

     

    Sorry for the rambling, but, I am trying to find a driver for future economic growth and they are getting fewer and fewer. That is why I keep an eye on copper prices because it has been a pretty good indicator over the years as to world economic health. It hit a double bottom last night back to where it was in 2008.
    21 Jun 2013, 09:44 AM Reply Like
  • Notrub: I am more concerned about China than Europe at the moment.

     

    When compiling data on what is happening in a large economy, the result will inevitably be wrong in an absolute sense and is at best an estimation, even when done in good faith with a lot of effort thrown into the task.

     

    I am naturally suspicious of China's GDP data but would view GDP growth this year in the 5% to 7.5% range to be in the ballpark.

     

    However, I would discount some of China's GDP. Some of the GDP is based on large construction projects that result in large cities being built with no inhabitants, somewhat analogous to building highways, retail centers, apartments and everything else associated with a small city, every few weeks, in the middle of Kansas.

     

    60 Minutes Program
    http://cbsn.ws/15Deyrk

     

    Transcript of Program
    http://cbsn.ws/Xma2LP

     

    Eventually those cities will fill up with the huge migration from the rural areas now underway. And, I do not have any questions about the central thesis underlying growth in Asia including China, the parabolic rise of a really huge middle class that will be a source of worldwide growth in the coming decades:

     

    See, e.g. this video at Morningstar that should be available to non-subscribers:

     

    http://bit.ly/1azEhEt

     

    I bought Unilever at $18 back in March 2009 and still own those shares for the reasons mentioned by that analyst.

     

    159 Page Report Titled "The Super Cycle"
    http://bit.ly/XaalaP
    21 Jun 2013, 10:02 AM Reply Like
  • Thanks for the reply SG. It helped explain a lot of what has been going on this week. Especially the 60 minutes video. It will be unfortunate to see China go through our financial crisis of 2007-2009, but, it does seem that is where they are headed.
    21 Jun 2013, 11:00 AM Reply Like
  • Notrub,
    Not sure what your position was/ is on the macro issues that i believe have been a part of where the markets are.. BUT

     

    IMHO , I don't think a corrective phase or the "nothing" new fed remarks have changed that.

     

    I am currently concentrating on the upcoming earnings season..
    I believe it will be one of the catalysts that wil shed light on next move up , down or sideways..
    21 Jun 2013, 09:58 AM Reply Like
  • F&G thanks for the response.
    I am also waiting for earning season. My current expectation is following the trend down.
    21 Jun 2013, 10:41 AM Reply Like
  • Not,
    I'm with you one the trend here, one scenario that I would absolutely luv to see play out in the short term is we settle somewhere in the S & P 1525- 1575 area. Then have an absolutely dead market , to digest these gains. It would give folks that want to write options for income a great environment to generate profit.. May work out with the summer doldrums ahead..

     

    Then again the market rarely gives us what we want -- LOL
    21 Jun 2013, 11:16 AM Reply Like
  • IT,
    You ask about what I find as I go though looking for value stocks. It takes me a while because I also go through their financial statements they file with the SEC so I can read the notes to make sure there is no extraordinary accounting going on. So far all I have identified is Archer Daniels Midland (ADM)
    http://yhoo.it/15qgxNh
    21 Jun 2013, 10:14 AM Reply Like
  • Author’s reply » NOT

     

    Thanks for sharing that symbol,
    21 Jun 2013, 10:34 AM Reply Like
  • Just to let you know I just purchased 100 shares of (ADM).
    21 Jun 2013, 10:42 AM Reply Like
  • @Notrub

     

    How do you pick which ones to start with? Gainer's lists?

     

    For a list of stocks to start from, is Nasdaq's site the best bet?

     

    This morning was like watching the battle of the computers. I said "up", no I said "down." Apparently "down" packs a bigger megabyte punch.
    21 Jun 2013, 10:44 AM Reply Like
  • I know you probably won't like the answer,but, I have a watchlist of stocks I have developed over a year going through screenings and financial statements.

     

    Take the one I posted (ADM). Even though it was on my watchlist. It still took me from yesterdays close till this morning to go back and read the financials, especially the notes, for the last 8 quarters. Once I was satisfied nothing had materially changed since I added it to my watchlist I went to the market to see where it stood. I know the recommendations on ADM were for an entry of $30. But, since I look at it as a long term holding I went ahead and purchased at $33.39 because I do not see a $3.39 difference as being significant over the next 10 years.

     

    Hope that helps????
    21 Jun 2013, 12:33 PM Reply Like
  • Author’s reply » Folks

     

    I know this author and late last night he said he was putting together a new , and very interesting article. I appreciate your thoughts on this one..

     

    http://seekingalpha.co...

     

    Tom is one I follow concerning the metals for a year now.. Is he right with his assumptions??
    21 Jun 2013, 10:45 AM Reply Like
  • I tend to think he is, but it is only my gut telling me he is. All during the Fed speech and the analysis, my only thought was, "Yea, but what if he's not telling us the truth".
    21 Jun 2013, 12:47 PM Reply Like
  • Tom's comment:
    "Gold will need to re-capture $1320 immediately while the need for protection from these events that tangible assets offer is higher now than it's been since Lehman Bros. fell."

     

    I agree from a technical standpoint the need for Gold to recapture that level ,,QUICKLY.. as I laid out yesterday.. Therefore Unless i misunderstand i can't agree that there is a need now to dive in here and his "lehman" remark.. A comparison to what has happened in short term rates is not an impending "lehman" event, and IMO "fear" talking.

     

    last time i heard of a "lehman" event being bandied about was "Cyprus" and their banking system -- we're still here-- each can draw their own conclusions !!
    21 Jun 2013, 12:51 PM Reply Like
  • IT,
    Here are some analysis of (ADM) for further info:

     

    http://bit.ly/19amfdI

     

    http://bit.ly/17rDdn9
    21 Jun 2013, 11:08 AM Reply Like
  • Author’s reply » Here is my take on Today...I see a lot of posturing going on right now hoping for a bounce. If that does not occur we will see a sell off in the afternoon accelerate before the weekend.

     

    Plenty of data coming out next week and I have a feeling some don't want to get caught with their pants down.

     

    Just my 2 cents !!
    21 Jun 2013, 11:54 AM Reply Like
  • IT: I am lucky if I remember to put my pants on before retrieving the papers each morning-no complaints yet from the neighbors.

     

    I am not concerned about how the markets are reacting now to the eventual return of normal interest rates, which will be low by historical standards based on current inflation forecasts.

     

    I would urge everyone to broaden their time horizon beyond the next day and week, or even beyond the next few months.

     

    Money is made by focusing on the big events that shape our future, good and bad, rather than whatever investors are thinking or doing at a particular moment in time.
    21 Jun 2013, 12:45 PM Reply Like
  • SG,
    I agree. Which is why I was asking the questions this morning I was. Now, that I have a "little" perspective on the China issue I expect things to grow quite slowly over the next five years. With the usual bumps in the road along the way. As in the range of 2-5% annual world GDP growth.

     

    The information you put out on China was quite helpful. And, helps explain a lot in the drop of commodity prices and the slow down of net exporter nations to China, like Australia.

     

    It has also helped me decide where I will be putting my money over the next 5 years. The necessities. I think it is called defensive stocks. Things people will need to buy no matter what is happening with the economy. Food, energy, consumer staples, etc.
    21 Jun 2013, 01:10 PM Reply Like
  • Notrub: The decline in the Australian dollar has been steep and is something that I monitor. The Canadian dollar is another one that is viewed by many as a commodity linked currency and it is hitting new 52 week lows too. The Brazilian Real is in a dive too, just look at the price of VALE, now trading at around $13.55 after trading over $35 in early 2011.

     

    The decline in the AUD will prove to be beneficial to the Australian economy, and that decline is perking my interest some in buying back some Australian stocks that I sold last year. The best time for me to use my USDs for foreign stock purchases is when the host currency has declined significantly in value and the ordinary shares have also declined due simply to a market correction in price. I am waiting however for the AUD to find some kind of trading range at a lower level:

     

    AUD/USD
    http://yhoo.it/16UibKn;range=1y

     

    BRL/USD (Brazilian Reel)
    http://yhoo.it/16Ui9C2#symbol=;range=1y;comp...
    21 Jun 2013, 01:22 PM Reply Like
  • SG,
    That being the case you might want to take a look at Chevron (CVX). They have been taking a bigger part in the shale and other oil boom that is currently going on their. Because of it size Chevron has been getting into partnerships of the local companies that do not have the resources to fully capitalize on their lease holdings.

     

    I found out about all of that while doing research on Linc Energy.
    21 Jun 2013, 01:53 PM Reply Like
  • SG51:
    Leveraged Munis are offering yields over 6% after federal taxes so they should be attractive to you.
    21 Jun 2013, 01:55 PM Reply Like
  • extremebanker: I am monitoring the leveraged municipals daily and have several on my radar list. I bought and sold just recently BKK, a 2020 term municipal bond fund from Blackrock. I currently own only the recently purchased NPI, and that position is 100 shares.

     

    I have issues with them, based on my views of interest rate normalization and my historical knowledge about how individuals react when CEF prices are declining rapidly, which is causing me to be extremely cautious. The effect of the leverage is compounding their problems now, as is their relatively long durations. In short, I expect the downdraft to continue at least until the 10 year treasury finds a point to stabilize.

     

    I did recently lower my forecast for the ten year treasury yield in 2015. I now anticipate that the yield will cross over 4% within two years, possibly hitting 4.25% before the end of June 2015, while my previous estimate was 4.5%. We still have a ways to go in my opinion just to normalize rates after the FED ceases its massive intervention in the bond market. The reduction is based on inflation remaining mild and my recently completed study of ten year nominal yield spreads to inflation during 2003-2007.

     

    I bought and sold a bunch of leveraged municipal bond funds in 2011 as trades, and went back last weekend to compile a list of those previously sold. I am tracking some of those daily now and their prices are below my entry points in 2011.
    21 Jun 2013, 02:19 PM Reply Like
  • South,

     

    I agree wholeheartedly , I'm always having to put my "trader" hat on to answer those that, although have a long term horizon , just have to have answers on what is happening NOW.. So i dont appear to be unprepared for their e- mails, etc.., I feel obligated to "paint" that short term picture also.. makes for good conversation for some,,

     

    Bombarded this week given the volatility and a full moon is upon us this sunday !
    21 Jun 2013, 03:48 PM Reply Like
  • SG51:

     

    Markets are irrational especially the muni market but a few points interest me.

     

    The 5 yr average discount for NPI is -3% and currently is trading at a 9% discount.

     

    The average coupon on their portfolio is 4.71with an average bond price of 98.05. The current yield is 6.6% with a taxable equivalent of 10.15%. I don't find any 18 yr.investment grade muni bonds with a coupon of 4.71 and selling for a discount.The discount almost reached 30% in 08 but with an average duration of 5.17 years and average maturity of 18.27 years these prices are certainly below current market levels.

     

    Many times what will happen with increasing rates is the yield curve will flatten which is one reason I prefer longer dated bonds. With a TEY that is over 700 basis points greater than treasuries, this certainly is a possibility.

     

    I have been nibbling and will continue.
    21 Jun 2013, 04:33 PM Reply Like
  • Extreme: I am looking at the problem as a trader in these securities. I will become more comfortable holding long term when interest rates normalize. Until we see some stabilization in the intermediate and longer term treasuries, carnage in leveraged CEF bond land is likely to be the rule rather than the exception.

     

    As noted in my last blog, I sold BKK at $16.82 after holding it for a few days, long enough to collect one dividend after buying it at $15.93.

     

    "Bought 100 of the Municipal Bond CEF BKK at $15.93-Then Sold BKK at $16.82"
    http://bit.ly/14CU4Q2

     

    I have not discussed buying and selling a security in the same post since I started writing them back in October 2008. The bond CEFs are giving me motion sickness at the present time. Still, I may buy 50 shares of something which I did today in the ROTH bringing my total for that CEF up to 100 shares. I will discuss it in my weekend blog assuming I get around to writing it tonight or tomorrow morning.

     

    Cautious is the operative word for the time being.

     

    Individual investors have a tendency to sell CEFs without regard to anything other than the price going down.

     

    I can discuss at length the yields at the current market price; the discounts to net asset value expanding way beyond the 1, 3 and 5 year averages and near or over 10% now; the fact that the decline in market price has far exceeded the decline in net asset value on a percentage basis; and the tax equivalent yields being over 10% in many cases, and I could do that until my face turns blue and it will not matter one whit.

     

    Persistent declines during periods of turbulence and distress is what we are seeing now.

     

    So the downside risks exists for that reason and also due to the acceleration in net asset value declines caused by the 35% or so leverage.

     

    It is generally not a good idea to own 35% more of something going down in price a lot using borrowed money even with the short rates being very low.

     

    I will take another look on Monday after I see how much those municipal bond CEFs declined during the week and how their net asset values declined compared to treasuries with similar durations.
    21 Jun 2013, 04:55 PM Reply Like
  • SG:

     

    I have been lucky with trading this year and have taxable gains to deal with. I sold a losing corporate bond position ($2500 loss) and a 5.5% yield and took most of proceeds and bought NPI with a tax free yield of 6.6%. Duration was increased, credit quality was improved and tax liability was reduced. I had been reducing duration prior to this bond correction and my bond allocation was lower than it had been forever. Starting to nibble and increase bond allocation and duration at these higher yields.
    21 Jun 2013, 05:17 PM Reply Like
  • Extreme: I have moved one data point up to daily monitoring since the signal started flashing yellow.

     

    I mentioned in another comment that the average annual CPI estimate embodied in the 10 year TIP closed today at 1.93%. That number was close to 2.5% at the start of the year. This is troubling. It is not surprising given the FED's reduction in inflation estimates earlier this week as well as the recent CPI and PCE Price Index numbers which have been trending down.

     

    See Rex Nutting's Discussion in his Marketwatch Column:
    http://on.mktw.net/11R...

     

    With QE ending, investors are expressing a concern about deflation and that is being reflected in the significant reduction in inflation expectations embodied in the 5, 7, 10, 20 and 30 year TIP prices. The 30 year TIP inflation estimate closed today at an annual average of 2.15%.

     

    A continued movement down in those estimates in the coming days and weeks would cause me to lower again my normalized 10 year treasury forecast over the next two years and cause me to reallocate more into higher quality fixed income. The timing is very uncertain at the moment.

     

    So this is becoming a day to day look see for me.

     

    NPI does have its weighting in "A" or better municipals with just 12.71% in BBB.
    http://bit.ly/1aj96Nu

     

    I would have other higher quality taxable bond CEFs on my monitor list for the IRAs.

     

    I am nowhere near considering the repurchase of ACG that has a 66%+ weighting in AAA, but that one would come back into my radar with a louder warning about deflation possibilities signaled by the TIP pricing.

     

    ACG closed at $7.41 today.

     

    I sold all of my shares back in August 2012 at $8.44 and have not been back since that time.

     

    3. Sold 400 ACG at 8.442
    http://bit.ly/11RSMvj

     

    I try to remain flexible and digest whatever information, which is out there to be found, being somewhat handicapped working from a desk in the SUV Capital of the World with no MIT pets at my disposal and having billions of brain cells fried working during my "summer vacations" on my Dad's construction projects at $2 per hour back in the 1960s.

     

    I have been known to change my direction on a dime based on the data, and I may do that with bonds in the coming months. For now, I am wary and content to own mostly individual bonds that can be held to maturity.
    21 Jun 2013, 07:30 PM Reply Like
  • Does anyone have any info on Chinese liquidity issues? Just a hunch that part of the sell off of everything in recent days has been Chinese related.
    21 Jun 2013, 09:28 PM Reply Like
  • Extreme: There are a couple of good articles on the subject.

     

    Forbes
    http://onforb.es/10Flqpz

     

    Reuters
    http://reut.rs/10FlqpB

     

    There were a number of articles earlier in the week about a Fitch report on China's shadow banking and lending.

     

    http://read.bi/10Floy2

     

    Cause and effect is always open to dispute. I would tie the U.S. market dive to the turmoil in the bond market and the very rapid rise in interest rates that wiped out several years of interest payments from low yielding treasury notes and bonds.
    21 Jun 2013, 09:39 PM Reply Like
  • Author’s reply » SOUTH

     

    Do you ever get out to see the sun? Serious, you are full of so much information you might want to take a break once in a while.. Just sayin.

     

    I wish I really understood all your posts, and I am sure some do. But your like a walking Investment class!!
    21 Jun 2013, 09:43 PM Reply Like
  • SG: Thanks for the links! Those of us born in 51 can pursue our hobbies on a Friday nite and never leave home although the wife and I went out to eat and shop a little. We are going to Fla. next weekend for a wedding.

     

    IT: You have to learn something when you have been doing it for 40 years. I always thought passion and discipline were two important investment skills to possess. SG1951 certainly has both.
    21 Jun 2013, 09:52 PM Reply Like
  • Author’s reply » EXTREME

     

    Could not agree with you more. His education shows !!
    21 Jun 2013, 09:57 PM Reply Like
  • extreme

     

    yes, we all talk about China as if we are in better shape; yeah, right!! we talk about the Fed buying the mortgages bonds but never mention what is going on at Fannie Mae, Freddie Mac, FHA, and FDIC; these GSE are black boxes and nobody knows what is going on but for sure casino gambling is going with taxpayers money; let's do an audit and see what is on their books...never going happen
    21 Jun 2013, 10:22 PM Reply Like
  • Hi Rina:

     

    You certainly have my vote. We do know Fannie and Freddie have lost over a 100 billion and still rising. I am not as good as SG51 on providing links but seems I remember it was over 150 billion SO FAR.

     

    We are still seeing DUMB deals by the GSE's. Little or no down payments, weak underwriting and extremely low interest rates that will surely be a loser for someone. (the taxpayer)
    21 Jun 2013, 10:30 PM Reply Like
  • Extreme ,
    the gentleman possesses a wealth of information , the important factor for me is that he is kind enough to share that knowledge with others..
    22 Jun 2013, 08:50 AM Reply Like
  • IT: I appreciate your concern, but I am a player, always have been and always will be, or at least for as long as I remain mens sana in corpore sano.

     

    The bogeyman will certainly catch me if I slow down my efforts. Best to stay one step ahead of potential land mines whenever humanly possible and that bogeyman can do a lot of damage when he catches up to you.

     

    While I enjoy looking at the stars and blue sky, and climbing to the mountain top to take in the view, mostly I am looking down to make sure that I do not step into any holes, break my leg or hip, and end up in a hospital with an excellent view of a block wall painted in a disgusted beige shade.

     

    If I had to worry just about my money, I could take less time, but unfortunately I am expected to do more.
    22 Jun 2013, 12:36 PM Reply Like
  • IT,

     

    I left a comment above my take on recent market activity..
    Take note of the quadruple witching today, and next week's end of quarter volatility with "window dressing"
    21 Jun 2013, 12:41 PM Reply Like
  • Author’s reply » F&G

     

    I WILL. Thanks for that input ...
    21 Jun 2013, 01:27 PM Reply Like
  • Started scaling into a position on (RDS.A) Royal Dutch shell , today for myself and a couple of accounts.

     

    Nice valuation, Pe Under 8 -- 5.7% yield,

     

    An author here on SA, Ray Merola , a veteran of the energy space is a good source for fundamental analysis in this space to assist with your due diligence....

     

    Happy investing !
    21 Jun 2013, 01:24 PM Reply Like
  • F & G: My 90 year old mother bought some RDS.A earlier today when the price went below $64.

     

    So far, I have not had to pay the Dutch withholding tax for the dividend by electing to reinvest that dividend to buy additional shares.

     

    Just as a FYI, it is not generally known that brokerage firms can lower the foreign tax liability by making a mass filing for their customers requesting "relief at the source", at least from France's tax and possibly others. For example, France has a 30% withholding tax and customers of Schwab and TD Ameritrade will have that amount withheld from the dividend. However, Fidelity and Vanguard file with the French tax authority a relief at source document that reduces the tax bite to 15%.

     

    You can see some documents on this matter by simply using these terms in a google search: france relief at source dividend or simply reviewing this document from Depository Trust:

     

    http://bit.ly/183DHzr
    21 Jun 2013, 01:35 PM Reply Like
  • south ,

     

    great minds think alike , nice to hear i am in the same camp with your MOM.. ! an honor ! :)

     

    purchases were made in IRA accounts with diff brokerage accounts involved.

     

    Without getting into all details , i don't hold clients funds in my accounts. Don't want exposure/ liability issues. Provide advice , etc. for fee based on what an individual has invested in markets. My incentive then is to grow their wealth. I rarely ask a client to invest in something I don't own , hence i added (RDS.a) for myself.

     

    Client maintains his/her brokerage account and of course is responsible for tax issues , etc. if it is non IRA..
    21 Jun 2013, 01:51 PM Reply Like
  • Author’s reply » F&G

     

    This is also open to EVERYONE.

     

    I AM HAVING A HARD TIME rationalizing why we have to raise the margin on gold any% at all.. I hear to stop volatility but isn't this what a FREE market should NOT have, a manipulative device to actually stop you from investing ??

     

    I always thought supply vs demand should be the ONLY way to trade. Not to put a margin on something. Appreciate some thoughts on this to clear my thinking.

     

    Thanks!
    21 Jun 2013, 02:00 PM Reply Like
  • F& G: My mom has better stock market timing that I do.

     

    I added 50 RDS/A just before the most recent swoon stock market swoon in my account at a $2 per share higher price than her purchase this morning.

     

    When I visited her this morning, she was looking at her high school album from 1941, trying to find a picture of someone she once knew and did not appear concerned about the market. She has 24/7 caregiver service which allows her to continue living in her own home. Occasionally, she asks how her stocks are doing and I say fine.

     

    I am not a financial advisor but I really have no choice but to manage money without compensation of course for certain Right Brain family members, my mother, and as the trustee of my late father's testamentary trust.

     

    If I had gone into your business before retiring, I would insist on the client keeping the assets in their own brokerage accounts with me simply have nothing more than trading authority.
    21 Jun 2013, 02:32 PM Reply Like
  • South,

     

    When I embarked on this , that was my position, trading authority only..

     

    Best to your mom, Let me know when she decides its safe to go back into the banks -- :) or for that matter anything else.. ;)
    21 Jun 2013, 03:04 PM Reply Like
  • IT - I suspect there is a risk of loss component to their decision process. They probably charge everyone the margin requirement and periodically some folks go belly up. The same concept is in charging poor credit risks a higher interest rate (seems counter-intuitive on one level). The margin charge may mitigate that to some extent, either by aiding cash flow, or by reducing their overall exposure.

     

    The next question revolves around the costs/benefits of leverage.
    21 Jun 2013, 04:13 PM Reply Like
  • From BB Q&A

     

    Q. Following up on that, so I understand the 6.5 percent is a threshold, but you've just talked about 7 percent for asset purchases that sounded less like a threshold than like a target. You said if you're at about that level, you'll stop with the asset purchases mid-next year. You talked about wanting to see substantial improvement in the labor market before you did suspend those purchases. It's very easy to imagine a situation in which we get to 7 percent without seeing labor force participation increase. The unemployment rate's been at the same level for three years now. Has something changed in your thinking about the value of asset purchases? Why are you cutting them off before you see that substantial improvement?
    A. Well, substantial is in the eye of the beholder. I think going from 8.1 percent and a stagnant rate of improvement to 7 percent and stronger economic growth is a substantial increase.

     

    I think it's important to explain that we view ourselves as having two tools. One of them is rate policy, and that includes both setting the rate and providing guidance about future rates. That's our basic tool. That's the one that the Federal Reserve and other central banks have used forever.

     

    Asset purchases are a different kind of thing. They're unconventional policy. They come with certain risks and certain uncertainties that are not necessarily associated with rate policy. So our intent from the beginning--as I've been very clear about -- was to use asset purchases as a way of achieving some near-term momentum to get the economy moving forward into a sustainable recovery and then, essentially, to allow the low interest rate policy to carry us through.

     

    So let me just make two, I think, very important points. The first is, our target is not 7 percent. It's not 6.5 percent. Our target is maximum employment, which, according to our projections, most people on the Committee think is somewhere between 5 percent and 6 percent unemployment. That's where we're trying to get to.

     

    The 7 percent, 6.5 percent, these are guideposts that tell you how we're going to be shifting the mix of our tools as we try to land in a smooth way onto the aircraft carrier.

     

    So the other thing I wanted to say was that stopping asset purchases, when that happens--and I think we're still some distance from that happening--but when that happens, that won't involve ending the stimulus from asset purchases, because we're going to hold onto that portfolio. And if the stock theory of the portfolio is correct, which we believe it is, holding all of those securities off of the market and reinvesting and still rolling over maturing securities will continue to put downward pressure on interest rates.

     

    And so between our commitments to low federal funds rate, the large portfolio, we will still be producing a very large amount of stimulus, in our view, enough to bring the economy smoothly towards full employment without incurring unnecessary costs or risks.
    21 Jun 2013, 01:27 PM Reply Like
  • Ok, so the UE target rate is 7%.
    If they keep using the same metrics to calculate unemployment we could certainly see 7%.

     

    As more people become unemployed and run out out of UE bene's and/or stop looking for work, they are no longer counted as unemployed. So if companies can just lay-off more people, it won't be long until that 7% is achieved and they can achieve it by actually having greater numbers of people lose jobs, then lose their UE bene's.

     

    Pathetic.
    21 Jun 2013, 02:15 PM Reply Like
  • jhooper,
    Thanks for the post. I don't think the bond market believes this part:

     

    And if the stock theory of the portfolio is correct, which we believe it is, holding all of those securities off of the market and reinvesting and still rolling over maturing securities will continue to put downward pressure on interest rates.

     

    http://on.mktw.net/16U...
    21 Jun 2013, 01:35 PM Reply Like
  • If the Fed ends, tapers QE, I think the bond markets are wrong if they think rates will go up. Rates will fall.
    21 Jun 2013, 01:43 PM Reply Like
  • Just another interesting item from the Q&A.

     

    Q. On Monday, President Obama said in an interview that he believed that you had stayed in your position as Chairman for longer than you wanted to and maybe longer than you were supposed to. Do you agree with that assessment of your term? And can you update us on any conversations you've had with him about your future?
    A. Well, we just spent two days working on monetary policy issues, and I would like to keep the discussion questions here on policy. I don't have anything for you on my personal plans.
    21 Jun 2013, 01:41 PM Reply Like
  • Another interesting blurb. I remember some folks thought Basel III occuring was just hysteria. Looks like its gonna happen. Remember, gov regulations are just taxes, and taxes are just additional fixed costs. Additional fixed costs mean shortages. So, additional fixed costs for the credit industry mean shortages of credit. One way to increase shortages of credit is for the Fed to become less accommodative. As such, fiscal policy via gov regulations is the same thing as making the Fed less accommodative, and that means risk-off and lower asset prices (or not as high as they might be). This is what I mean by DF leading to risk-off.

     

    "So it does take time. I think it's a little unfair to say, well, only 30 percent of the rules have been completed, because most of the rules, even if they haven't been completed, are now very far advanced. And that's true for the major rules.

     

    We are very close, for example, to completing Basel III. We have made a good bit of progress on the Volcker rule, and I do anticipate that being done this year. We are making additional progress on our 165, 166 advisory rules on the capital surcharges. These are all things that will be coming relatively soon, at least during the current year. And, of course, once they are out there, then it will still take some time to be implemented, for financial institutions to change their practices, and so on."
    21 Jun 2013, 02:00 PM Reply Like
  • To Everyone:

     

    Anyone has ever tested Joel Greenblalt Magic Formula on a couple of years? I want to start testing it but would like to know if anybody here got some interesting results with it.

     

    I am doing a lot of research, comparing various time-frames, asset classes, inflows & outflows of funds by the retail investors by period compared to institutional investors etc. and I found his strategy...seems interesting.

     

    By the way, it seems we have a yellow flag right now on the recent inflow of funds by the retail investors. The retail investor seems really excited about the stock market.

     

    Thanks!

     

    Krustyman
    21 Jun 2013, 02:14 PM Reply Like
  • Krusty ,

     

    what's the time stamp on that retail investor data ?
    21 Jun 2013, 03:05 PM Reply Like
  • Fear&Gread:

     

    1994 to half 2013.

     

    Krustyman
    21 Jun 2013, 04:35 PM Reply Like
  • Author’s reply » http://seekingalpha.co...

     

    This chapter is taking too long to load for a few people ..So I posed a question in the next one that I think needs some posts.

     

    THANKS.....MOVING ALONG !!

     

    NOTE...I WILL BE GONE ALL DAY TOMORROW SO THIS WON'T BE UPDATED UNTIL LATE SATURDAY OR SUNDAY MORNING!!
    21 Jun 2013, 02:23 PM Reply Like
  • I've been trying to understand a few things and realized while we are playing in a rigged game, the question to ask is who is rigging it and why. We believe it is the banks, central banks and hedge funds but I believe what we have is just another front of a war between countries.

     

    We know that the NSA is the aggressor in cyberwarfare.
    We know that we possess the most nuclear, biological, chemical warfare technology and the ability to produce it.
    We know that conventional warfare we are unstoppable.

     

    So, what is left? Financial warfare. If you couple the NSA with Central Bank activities and then use your 'muscle', JPMs of the world, you can imagine how easily things can be manipulated. I used to wonder how the 'too big to fail' banks were allowed to get bigger until I thought about why. The reason is you need the big banks to do your dirty work. Why are a quadrillion dollars in derivatives allowed, because they are the arms in the wars. Warren Buffet said it first, weapons of financial mass destruction.

     

    So... I know I am being gamed (and so are you), when I am being gamed by people that are smarter, better equipped and more motivated than me, I have to quit the game. I have not taken a true beating in decades because I have learned to be afraid in the right situations.

     

    My plan is to continue to avoid fixed income, increase my holdings in energy infrastructure MLPs and other high paying dividend stocks. The money that is made is taken out of the game in physical metal. No attempts at timing, trading, or chart reading is for me.

     

    The level of control and manipulation leads me to believe things are coming to a breaking point. The lies coming out of Washington are not only numerous but extremely transparent. The control of the media is disgusting. The markets are so rigged/controlled/gamed that I truthfully just have to pack up my marbles and leave the game and try to stay out of trouble, forget about making headway.

     

    I plan on being out of everything by mid 2015, that is when the Fed may begin the taper. The next president will reinstate QE at double or triple what we have now.

     

    This stuff is getting truly frightening.
    24 Jun 2013, 05:45 PM Reply Like
  • Well said FF.

     

    As for the media sometimes I wonder who controls who?
    24 Jun 2013, 06:50 PM Reply Like
  • The media? Some of them are controlled by our 'friends' in the Mideast. Wink wink. Some are controlled by retarded conservatives, I say retarded because I am a consevative and these people on my TV are too difficult to watch.

     

    Make no mistake, the media works for the government.

     

    Example: Syria, has anyone explained the pipeline situation?

     

    Example: Benghazi. Has anyone explained the gun running to Syria.

     

    Example: gaddafi. Has anyone discussed why he was overthrown by the U.S? Because he wanted to use gold to trade oil?

     

    It is all lies. I'm dropping out. I'm taking my marbles.
    24 Jun 2013, 10:48 PM Reply Like
  • Sounds like ya got a case of the blues FF. Your right on on your comments. I feel the same some days if I think to much about it. I try not to get too upset about things I can't do anything about. You are more aware then 99% of the rest of the country.
    24 Jun 2013, 11:04 PM Reply Like
  • I know my post sounded like a conspiracy theory with JPM being the muscle for the Fed and getting information from the NSA, but answer me this... If the markets are not rigged, how can these big banks post quarters with no trading loss days? There is a huge problems here, how did these banks which only a few years ago nearly default, collapse, then get bailed out all of all of a sudden develop the skills needed to trade with perfection for months on end? It is the insider information provided by NSA wiretapping activities. It is simple front running. We are being scammed, this much is sure.

     

    Look at deals being brought public, many times there is unusual trading activities in the days prior, yes insider info, but rarely arrests, this is because you can't arrest the NSA/fed/JPM. Scam.
    25 Jun 2013, 09:47 AM Reply Like
  • fish,

     

    Its not paranoia when they really are after you and just because something may be a conspiracy theory does not mean its wrong.
    25 Jun 2013, 10:16 AM Reply Like
  • Fishfryer:

     

    You are so right regarding the trading profits. Impressive!

     

    Sometimes I just want to buy (GS) and watch the show.

     

    Krustyman
    25 Jun 2013, 09:13 PM Reply Like
  • Author’s reply » @FISH

     

    You are making great points so could you advance to chapter 16 and continue this dialog. Some just don't go back in Chapters to read or comment on what you write.

     

    Thanks, as a post somewhere here gives you the link to move on. I seem to have to load a new chapter daily !!

     

    Thanks..
    25 Jun 2013, 09:51 AM Reply Like
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