unfaire

The Next Crisis: Spiraling Inflation (Part 2)

Basically, on the long run, gold price rises with inflation of a currency, the U. S. dollars for us the Americans. On the other side, DJIA and other general market indices reflect the growth of the wealth of the U. S. corporations which is a combination of inflation and productivity increase. Therefore, as long as the U. S. economy is in expansion, the stock market will eventually rise above the gold price. The question is: Will the U. S. economy resume its robust growth after what had happened in the recent past? Is the U. S. on the threshold of going the way of other empires in the past, like Roman, Ottoman, British, and so on? Nobody can tell.
If you superimpose Barisheff’s the Dow:Gold ratio chart over DJIA, you will see those peaks coincide with the high points of DJIA just before the corrections thereafter and those “Buy Gold” periods coincides with those periods when DJIA was in consolidation, i.e., when DJIA stayed flat over a long period.
The lesson here is: When the stock market is overheated, overweight on gold, and when the market is underperforming, get out of gold and overweight on stocks.
Or, if you believe in the strength of the U. S. economy to keep going, stay in the U. S. stocks.
Or, if you think the U. S. is about to go the way of the empires past, go for gold.

Thursday Outlook: Commodities, Global Markets

The low interest rate of the Fed is hurting the economy! And, it is drying up the liquidity! Why?
If you are a small bank and having, say, $1 million of cash, would you lend it out today knowing Fed will have to raise the interest rate sooner or later when you will be able to make a lot more money at that time? You would just sit on it and do nothing. You won't finance a mortgage at today's rate and get stuck with it for the next 10, 20, or 30 years, if you think you can get better return after the Fed has hiked the rate.
On the other hand, the big investment bank turned holding banks take this costing-almost-nothing money and churn the stock market and making a zillions of dollars.
The net result is the this low interest rate is not creating liquidity. In fact it is hurting everybody except the big banks who can trade on their on account and those who have the gull to charge 30% interest on the credit cards.

Tuesday Outlook: Commodities, Global Markets

We human being have been fighting against each other for territories, properties, powers, and sex all through down the history. We coerced, cheated, doublecrossed, murdered, whatever the ends that justified the means. It has been bloody. The stock market is the new fighting ground, only that it is bloodless on the surface. While the big boys are slugging out amongst each other making huge surges, us the little guys should try to ride the waves hopefully to make money on both the way up and the way down. You know the adage well: Only the pigs get slaughtered.

Tuesday Outlook: Commodities, Global Markets

I have been wondering how the computers or Hal 9000 whoever they are are programmed to make money on the way down. It looks like they behave crumsily in a down market than up market. We have heard so much about how to forerun a buy oder but haven't heard much about forerunning a sell order.

Wednesday Outlook: Commodities, Global Markets

My guess is that computers or Hal 9000 whoever they are are targetting someone who have to buy. That someone is probably 401k. There, money is still coming in and they have to buy something. With a thin market, Hal can nearly buy up everything before the mutual fund make their moves. With this scenario the market will keep on going up to no end until Hal is reprogrammed to make money on the way down at a certain level. DJIA at 10,000? 12,000? 14,000? Or, when we all jump in with our two feet. That is the biggest guessing game in town now. Recession is over? Who cares! Look, someone is hording all this stocks now. They just sit tight and watch their valuation go up until one day when they think enough is enough and jump out of the market for something else with better return.

Tuesday Outlook: Commodities, Global Markets

Re Ryu Mei Co:
My guess is that the market has been taken over by the news-independent (or event-independent) computer programs. These programs seem to trade "against" market movements. It means when the market (or, almost any stock) goes down, they buy. The consequence is that the market turns up. And, when the market goes up, they dump the stocks they have just bought and make an instant profit. The market then turns down. This works in "thin" market and "stabilizes" the market. The Dow Jones has been in the mid 9,000 and going nowhere for a while now. Nobody is making money except those computers.

Friday Outlook: Commodities, Global Markets

The following is just a mumbling from a stream of unconsciousness.
We had oil bust created by trading frenzy with volume far exceeded the oil inventory. Now we have option trading of all stocks with volume far exceeding the underlying stocks, not just U.S. stocks but also of stocks of the world all over through ETF and other means. Could there be a huge U.S. and world market bubble followed by a tsunami crash in not so distant future? It would take more than trillions to fix, more likely mega-trillions? Remember it was only billions just a few years ago?
With all this high frequency trading and other new market manipulations which we don’t know, has the fundamental of the market changed? May be Hal 9000 has already factored in all the technical analysis we now know and depend on and found a way to circle around us. The shares and the stocks are now just like the oil, which by the way is floating on the high seas by the boatloads, a mere trading vehicle to make money?

Commodities, Global Markets

To quote from "How I made money during the great market crash of 2008" by Jamin Chen (www.lulu.com/content/p...):

"There is no guarantee that the past will repeat itself. But, sometimes, the past is a good indication of what is to come. The past is the only information we have and it may provide us with a glimpse into the future."

Tuesday Outlook: Commodities, Global Markets

Funny that UNG is only one quarter of what it used to be but my gas heating bill for my house didn't budge a bit.

Friday Outlook: Commodities, Global Markets

Is our government now setting up Pimpco to be the next too-big-to fail, or rather, too-big-not-to-offend?

Thursday Outlook: Another Bubble?

Inflation is the biggest Ponzi scheme in the world. It is mostly orchestrated by the government and taking advantages by the mass except those who hold cash and those who have no recourses to take a ride on it.

Tuesday Outlook: Commodities, Global Markets

I opposed the TARP. I smelt something fishy from the very beginning. It turned out that I was right. Most of those who got the TARP money are double dipping, or even triple dipping. It goes this way:
1. I lost billions buying some crappy financial instrument like CDS from, say, AIG and other cohorts.
2. Give me billions, tax payers, so that I can stay in business. I am too big to fail.
3. So, I got billions of tax payers’ money.
4. AIG as well as all the cohorts also got billions of tax payers’ money.
5. Since and AIG and all the cohorts are flush with tax payers’ money, take back from me those crappy financial instrument and pay me in full.
6. Now, AIG and all the cohorts including me got back those crappy financial instruments, I am in poor house again. Tax payers please make me full again by giving me billions.
7. And, the cycle goes on again.
Under the guise of too big to fail, we tax payers are continue to be taken for suckers. It is still not too late to:
1. Stop bailing them out.
2. Sell off various parts of the failing financial institutions in piece meal under the government supervision.
3. Give back the tax payers first whatever that can be recovered from the sale.
4. If there is any left, let the other stakeholders have them.
In a capitalist society, when the price is right, i.e., cheap enough so that some pieces of these failing institutions can be made profitable, there will be someone who would buy them and make money from them. In doing so, most of these pieces will be healthy again and making money by themselves without any more of tax payers’ money.
Bernanke said very well. I believe this is what he meant: When the politicians do not have the will to go against the self interests of the financial biggies, neglecting the well being of the all the rest including us the tax payers and who put them in office, we will never solve the problem.

Tuesday Outlook: Commodities, Emerging Markets

I am not an economist but I wholly agree with economist Rogoff. The bankers and their investors (share and bond holders) made bad investments. Many of us made bad investments in housing. We got busted. The banks and their investors should be busted. Why should we, who got busted, pay our taxes to save the banks and their investors from getting busted? It just doesn’t make sense.
There is one thing people don’t talk about it. May be it is too painful to talk about it. That is during the boom, we created a lot of money, especially in the form of credit given to subprime mortgages as well as in various derivatives derived from them. The world was afloat on cash. This certainly has created a distortion in the economic and financial situations in the whole world. As this bubble was busted, just like a balloon got busted and its air is let go, these extra money got to let go. We all are dreaming, dreaming of the fantasy world that was during the boom would come back. People talk of recovery as if that fantasy world would come back. No, recovery means returning to the world before the boom. But, even that is not possible. The boom has distorted the whole economic system of the world and we can never go back to where it was. Instead, a new world economic order has to be created.
Putting more money into the broken banks is equivalent to creating more money. It simply is not logical. After the TARP fiasco, everybody sees it now. Or, do we?
Some people say President Roosevelt did not contribute to the recover from the crash of 1920-30. It is the World War II that did it. The government created jobs including the armed services as well as all that production of arms. If you look at the Dow Jones Industrial Average (DJIA) from 1920 to 1950, you will see it clearly that the pre-crash high of DJIA was not reached until well into 1950s. So, the key to recovery is JOBS.
In fact, everybody is talking about jobs. But, nobody is doing anything about jobs. Everybody is being busy how to carve up the money to line their pockets. Pork is too kind a word for it. If they are really interested in creating jobs, why not give tax credit to all jobs. The total U. S. employment is about 150 million people. Even if you give an average of $10,000 tax credit to each job, it amounts to ONLY $1.5 trillion. I say average because we should not give millionaire or billionaire bankers any of these tax credits. We should not let business to import more cheap foreign workers at the expense of our tax money either. We should give this tax credit to any U. S. registered corporation or company, including those mom and pop shops. We should apply it to any employee who had paid the whole year of social security tax and filed income tax at the end of the year. In some way, we the tax payers will get some money back, isn’t it? How nice. At the tax time, we will be surprised because the bill won’t be $1.5 trillion, in fact much less, after collecting all the additional tax revenues and social security payments.
We should care what they do. They may make firecrackers for that matter. During the WWII, they made things that just got blown up in the battlefields, didn’t they? With lower labor cost, companies may not have to lay off as many people. Hopefully, they could use lower labor cost to create some profitable business and hence employ more people.

Thursday Outlook: Commodities, Emerging Markets

It is about time that those who initiated the bad loans (including banks) and those bought them (including banks and other investors) take their consequences instead of us tax payers bailing them out. We have had enough of this other people's money (tax payer's money in the current crises) mentality.

Tuesday Outlook: Commodities, Emerging Markets

David:
I like the way you have been doing. It is instant analysis (with years of experience and insight behind it) of what each chart presents. I am not interested in having educational blurbs in here except for some cryptic mentions of the backgrounds once in a while when necessary. Keep up the good work.
I got the sense that investors large and small are quite angry about all these bailouts and how all these politicians, both outgoing and incoming, are handling the current financial crisis, though not at the boiling point yet.