Larry MacDonald1

Online Recession Betting Not Quite What It Seems

Speculator: You are probably right. Indeed, preliminary GDP estimates during a dowshifting phase like now usually get revised down. As the Intrade contracts are based on final estimates, that was another attraction to trading them. The Q1 estimate of 0.8% growth in GDP, for example, could be revised to a negative number by the time revisions are finished.

Ben Is No Helicopter

Icandoitdon

I too believe the U.S. economy has long been over-stimulated by the Fed and U.S. government -- as highlighted by the chronic deficit in the trade balance, low savings rates, rising debt, etc. Negative real interest rates, of course, have contributed to all the foregoing. I wonder, though, if they are something to worry about in the midst of a financial crisis. Maybe it would be better to ensure the system is stabilized before re-focusing on what has to be done to end easy money policies.

As for what the Fed is doing now …. as I understand it, the Fed is actually trying to keep interest rates from falling as much as the market wants. As you say, there has been a flight to the safety of treasuries -- which has bid their yields way down. But the Fed's discount rate has not followed them all the way down. It is keeping its discount rate higher by selling treasuries -- which also drains cash from the financial system. My guess is the Fed wants to avoid an even bigger run on the U.S. dollar and keep inflationary expectations at bay by sterilizing much of the liquidity generated from actions taken to stabilize the financial system.

Assuming the system stabilizes, the Fed should begin to address its bias toward over-stimulation. The agency is now conducting an internal review of its past “hands-off” policy toward asset bubbles. Hopefully some changes will come of that. One possibility is greater use of regulatory tools. Another, which I have posted on before, is formal or informal inclusion of asset prices in the price target.

Bullish on Natural Gas Sector

Tarik.ca:
First, I didn't say MCF. The pension fund manager used the term in a quote I provided. Second, if you google MCF and LNG together, you will see that it is common for LNG prices to be quoted in MCFs.
LM

Bullish on Natural Gas Sector

Original post explained that GAS (a Canadian gas ETF) tracked NGX (an index of Canadian gas prices). Original post also referred to term
Liquefied Natural Gas in generic form not as name of a company as appears here. And there was not reference to UNG. Can't help the editing. Sorry.

Canadian REITs are Bargains Now Too

The ETF, as mentioned in the article, is called, iShares Canadian REIT Sector Index exchange trade fund [ETF]. Symbol is xre on the Toronto Stock Exchnange. In Yahoo Finance, just type xre.to

Tactical, as Opposed to Calendar Rebalancing

Mike
Thanks. I posted today on "oportunistic rebalancing" in my Canadian Business blog. It's another interesing perspective on rebalancing (from the Journal of Financial PLanning). If you don't see it in Seeking Alpha, check out my ste at:
blogs.canadianbusiness...
Larry M.

VIX Call Options As Put Options

John
The title is not mine. You're right: I'm not talking about hedging here. The forecast method? When the VIX shoots up quickly from a low number to 30 (near my entry point) or beyond, it doesn't usually stay there long (as far as I see from the historical pattern). The tactical error, as mentioned in the post, was buying too far out of the money. When VIX flirted with 30 on Friday, the Sept 27.5 puts might have been the better bet.

Taking a 300% Gain On Volatility Index Options

The last paragraph in the Seeking Alpha July 23 post mentions “taking out insurance with volatility indexes, which can be done with [VIX] options …” The purchase price used was from the day the post appeared in my blog.

Taking a 300% Gain On Volatility Index Options

You may need to get a new broker. Mine takes orders for VIX options and the commission is less than 3% to buy or sell for transactions of $1,000 or more. A 300% gain swamps such commission costs.

How To Tell Whether Subprime Will Cause a Crisis

Islander
For signs of a financial crisis, government and corporate bond spreads are the main thing to watch according to Ken Fisher (see his July 16 article in the Financial Times of London). LBO war chests are more than mere credits according to BCA Research (a leading provider of independent research to institutional investors since 1941). Financial markets can lose confidence in monetary policy (e.g. in 2002), so the Fed’s actions are not always a reliable signal. Consumer behavior is a coincident or lagging indicator, I believe.

How To Tell Whether Subprime Will Cause a Crisis

Carlos
True, just about everything will be selling off including corporate bonds. But not government bonds: they will be very much in demand as a sanctuary. Hence the widening of the spread between government and corporate bond yields. Anyway, let's see what market events have to say in weeks ahead about our credibility.

Using the VIX to Hedge Against Subprime Fallout

Rich:
I hestitate to offer specific advice to individual investors, but can offer the general observation that you would need to buy the VIX call options (or futures) to hedge your portfolio. More could be added but the subject is on the complicated side, so I hestitate to dash off a quick reply here. I may post to my blog on this.

Natural Gas Stocks Still Have Steam

I'm with you on this sector.

To Stay Invested, Or Not?

If I may speak in general terms, someone who is retired with dependents should perhaps be following low risk strategies. Exposure to equities should not be too high.

Short Sellers: Maybe Wait With Chinese ETFs

Capital controls and yuan inconvertibility