philzuco

Why Stocks Scare Me Now

Tim, I suggest you actually do you homework...

Per the WSJ article below (on your bullish read on foreign appetite for Treasuries).

And by the way, I'm no gold bug -- in fact, I don't own a single ounce of gold. I have, however, been accumulating emerging market names in Brazil (I like in Rio) since 1999 and purchased more earlier this year (Vale, Petrobrás, Gafisa Aracruz, CDB, Klabin and Grupo Votorantim) straight off iBovespa. I haven't owned a single US stock for over 15 years. I'm up hundreds to thousands of percent in the select names on my pension fund portfolio -- thank you very much.

You see, I could care less about deflation or inflation in the US or about the doctored numbers coming out of Citigroup or Bank of America (while their loan books crumble behind the scenes). What I see is a long-term trend higher in developing nations (with stable governments and low debt-to-GDP ratios) that will last decades. What is going on is a redistribution of financial flows away from mature, over indebted economies and into developing nations.

It has nothing to do with ideology, fibonacci sequences or Elliott Wave cycles. America is done -- and you don't need to be a gold bug to figure that out.

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Is Foreign Demand as Solid as It Looks?

By MIN ZENG

JUNE 26, 2009

The sudden increase in demand by foreign buyers for Treasurys, hailed as proof that the world's central banks are still willing to help absorb the avalanche of supply, mightn't be all that it seems.

When the government sells bonds, traders typically look at a group of buyers called indirect bidders, which includes foreign central banks, to divine overseas demand for U.S. debt. That demand has been rising recently, giving comfort to investors that foreign buyers will continue to finance the U.S.'s budget deficit.

But in a little-noticed switch on June 1, the Treasury changed the way it accounts for indirect bids, putting more buyers under that umbrella and boosting the portion of recent Treasury sales that the market perceived were being bought by foreigners.

On Wednesday, the indirect bid for the $37 billion five-year note jumped to a record high of 62.8%, compared with 30.8% last month. And in Tuesday's, the $40 billion two-year note garnered an indirect bid of 68.7%, compared with 54.4% from the previous auction in May and the average of 36.4% for the past 11 auctions.

Foreign buyers hold more than half of Treasurys outstanding, and have become increasingly important as the Treasury sells larger quantities. This week the Treasury is selling a record $104 billion of notes.

The new definitions are deep in the arcane world of Treasury auctions. The change involves buyers who place orders through primary dealers. Those had been counted as direct buyers, but as of June 1 they were classified as indirect buyers, making that group larger than before. Because investors view that group as being dominated by foreign buyers, they assumed foreign demand was higher.

Treasury officials didn't respond to requests for comment.

Getting a better sense of investors' appetite, especially overseas, is imperative to the U.S. at this time when it needs to sell record amounts of debt in order to tackle surging budget deficits and fund massive stimulus programs to revive the economy.

Some big creditors such as China, Russia and Brazil have expressed concern about the value of their dollar-denominated holdings because they are worried that swelling public debt and aggressive monetary policies may generate inflation and weaken the U.S. currency. That, in turn, may put their massive Treasury holdings at risk of sharp losses.

Why Stocks Scare Me Now

Looking to short gold? hehe So you're part of the clueless Prechter crowd. Just a piece of advice: gold just broke out of an 18-month base. When commodities break out of major consolidation zones, they go higher for sustained periods of time. When oil broke above $40 some years ago, everybody kept trying to call the top. It proceeded to go as high as $150 before breaking down to $30.

Your dollar thesis of deflation is predicated on the idea that just because there's lot's of USD debt outstanding and the government can't print fast enough to offset the destruction of the currency, that the dollar must appreciate. The problem with your thesis is you assume that global store-of-value demand for USD will remain stable.

The problem with the USD is that foreigners have caught on to the fact that America will be a bloated, slow-moving deadbeat for decades to come. Bilateral trade arrangements are also beginning to be made in local currency (China-Brazil announced agreements in that direction a few months ago). Foreign currency flows into Brazil right now are higher than they were before the credit crisis began (needless to say, the Brazil, my home country, is on fire).

As for gold, the Shanghai Daily has repeatedly reported that China is reluctant to sell treasuries to avoid an exodus out of the dollar. However, to hedge their massive dollar exposure, the government is now committed to building a sizeable gold position (as inversely correlated asset to the dollar) as a hedging instrument. The gold market is relatively small one. With a sovereign player like China going for a dollar hedge, your intention to short gold (especially in the initial stages of a major consolidation zone breakout) could not be more misplaced.

Why Stocks Scare Me Now

Hey Timmy. How's that long UUP/ short SP-500 position going? I'll buy those dollars from you.... in 3 year's time -- and wipe my ass with them.

Getting Net Short

Just a question Tim -- just how much client money have you lost with your senseless long UUP position? It bewilders me that you get paid to manage other people's money.

You're missing a big piece of the puzzle with your senseless theory on the dollar: THE CARRY TRADE. Inflation or deflation in the US right now is only one determinant of currency value.

You're overlooking 2 other massive components:

1) the US economy will offer low interest rates for the foreseeable future (ie, low-yielding currency -- you've got emerging markets offering 3-8% yields)
2) economic growth in the US will underperform that of many countries around the world (take Brazil, for instance, with expected GDP growth of 4% next year)

Also, there's a limit to how much government stimulus the US can continue to dish out given just how near the limit the country is in terms of debt. At some point, debt markets will either demand much higher yields or just say no (it's happened before: think Mexico in 1994).

On the other hand, emerging economies with low debt/GDP ratios (think Brazil and China, in particular) have plenty of juice to continue implementing countercyclical policies should economic conditions continue soft into the medium run.

Hence, if investors can obtain better yield and better economic growth abroad, why would they deploy their cash in US Treasuries or the US dollar?

The bid under the dollar over the years has come, by and large, from abroad due to a "perception of low risk and stability" in America and robust economic growth. That perception has changed in the last year. The US is now seen as a slow-moving behemoth, loaded with debt (its safe haven status is under seige).

Foreign purchasing power from hedge funds, pension funds and sovereign governments will continue to move towards investing in economies with better yield and better economic growth prospects, the result is the CONTINUED WEAKNESS OF THE DOLLAR VIS-À-VIS THE REST OF THE WORLD (ESPECIALLY EMERGING MARKETS).

Assurant Is A Compelling Short Sell

Excellent trade idea. This has become a top short holding for me. Got in at 70 with a short limit order. Keep up the good work!

Fearful Day for Financials - Stop Trading! (7/14/08)

How can such a clueless person have their own show? That's the big question. He is literally ALWAYS wrong. Check the timing too. Amazing. He says WFC could go bankrupt, and the stock goes up 35% 2 days later. He says OII is a good play, the stock tanks 4% the next day. Cramer is either very unlucky, extremely stupid, or highly incompetent. My guess is it's a mix of all three. What a douche. And to think people actually follow this moron's picks..

Calling It Quits on Gold, Platinum - It's Time to Go Financials!

Dan, you obviously have no clue. Your article on "going long the financials" was essentially the PIVOT HIGH in the financials. Gold and silver are the place to be right now. The Summer months are a perfect time to pick away at weakness ahead of what will certainly be an explosive 2H 2008 for precious metals as global inflation starts to explode. Double-digit inflation is no longer a prediction by doom-and-gloomers. Upcoming price adjustments are making the news everyday. DOW Chemical recently announced that it is planning an across the board 20% increase in its prices. 20-year Notes have recently broken down from a multi-month head-and-shoulders pattern. Yields are beginning to spike as the bond market begins to price in a future of higher inflation. Also, check a chart of the US Dollar Index -- it is literally at resistance in a very long downtrend. And there is no fundamental reason why that should change. The risk-reward right now is very good on a bet against the dollar (or, namely, a bet in favor of gold).
Gold has still not responded given that it is in its traditional "Summer dolldrums" basing period. Come August, however, we should begin to see an explosive move higher. I want to be long DGP right now just in case we happen to start drifting higher ahead of August.

Central Sun Mining: When the Dust Settles, Juniors Will Shine

This analysis cracked me up. The author notes that when the juniors do recover, buyers will be more selective. He explains that investors should therefore avoid suspicious political jurisdictions such as Ecuador, Congo or Venezuela. However, in the next paragraph, he recommeds Central Sun Mining, a company operating in Nicaragua(?!). Who wants to invest in Nicaragua in this investment climate?

Moreover, why bother with an investment in Nicaragua when you can get resource growth (128M Ag. equiv resource at year-end 2007 and 300M Ag. equiv resource guided for year-end 2008), production expansion (4M oz. Ag-equiv produced in 2007 and 5.4M oz. Ag-equiv guided for 2008), political safety (Mexico), seasoned management (CEO Keith Neumeyer was a founding president of First Quantum, a multi-billion dollar resource company) and first-ever earnings delivery (Blackmont Capital forecasts $0.32 per share in 2008) at FIRST MAJESTIC SILVER (TSX:FR). Now there's a stock institutions will flock to when juniors start to move this year. You can take that to the bank.