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Catching Up on Articles

Back from a mid-week vacation, below are a few articles I found of note while catching up tonight:

I read on The Big Picture that the Baltic Dry Index fell for the 9th straight day - the index tracks international shipping prices of dry bulk cargoes. It can serve as an economic indicator and also can indicate how much buying China is doing since higher demand for dry bulk cargo will tend to drive up the index. A falling index could be a bearish sign. You can always check the current BDI on my blog under the 'economic indicators' section on the right hand side.

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Bob Precther is saying to 'step aside' from long positions. He did predict this current market move up, so he's at least worth listening to. From Yahoo:

In late February, Robert Prechter of Elliott Wave International said "cover your shorts," and predicted a sharp rally that would take the S&P into the 1000 to 1100 range.

With that prediction having come to pass, Prechter is now saying investors should "step aside" from long positions, and speculators should "start looking at the short side."

"The big question is whether the rally is over," Prechter says, suggesting "countertrend moves can be tricky" to predict. But the veteran market watcher is "quite sure the next wave down is going to be larger than what we've already experienced," and take major averages well below their March 2009 lows.

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Jack Hough of Smartmoney.com does a great analysis of stock valuations and concludes they are currently overvalued. Similiar analysis, but more in-depth, than a previous posting in which I referenced dshort.com on stock valuations. An excerpt:

Stock prices can easily rise from here, of course. The economy might expand faster than expected, inflation might devalue the money relative to all assets including stocks, or investors might simply follow one another into the decade’s third stock bubble. But prudent investors should raise cash and be highly selective in their purchases.
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QB Asset Management discuss gold, inflation, and monetary policy. Good 7 page read (pdf) for those interested in such topics. Some excerpts:

Today’s monetary environment may be characterized as very high money issuance and very low velocity because banks hold the vast majority of the newly-created Monetary Base. So then: IF YOU ARE WILLING TO ACCEPT THE PREMISE THAT THE FED’S (AND WASHINGTON’S) TOP PRIORITY IS TO RAISE OUTPUT LEVELS (GROW THE US ECONOMY), THEN YOU MUST ACCEPT THAT THE FED’S (AND WASHINGTON’S) TOP PRIORITY IS TO INFLATE PRICES. THERE ARE NO STUCTURAL OR MECHANISTIC BARRIERS PROHIBITING THE FED FROM SUCCEEDING, AS IT CAN PRINT AND DISTRIBUTE AS MUCH MONEY, AND PROMOTE AS MUCH CREDIT, AS IT CHOOSES.
Even if velocity does not rise naturally -- for whatever reason including a continuation of systemic credit deflation, waning borrower demand or a further diminution of the value of assets held by banks that forces them to keep hoarding the newly created Monetary Base -- then the Fed will simply make more Monetary Base and/or credit and Washington will ensure it is distributed directly to businesses and consumers. If that is necessary, then the new high-powered money already sitting on bank balance sheets will surely be multiplied many times through the fractionally reserved lending system to produce even more credit. If stimulation is achieved, systemic lending will increase.

As it stands today, the exorbitant increase in the US Monetary Base that has already occurred equals substantial dilution in the purchasing power of all existing fiat money, and ensures there is much more monetary inflation, as well as rising goods and service prices, to come. And so we argue that an extraordinary increase in the Monetary Base has already been manufactured by the Fed and sits latent on bank balance sheets waiting for an increase in velocity....

...The best market play we have seen in a long time (maybe ever?) is to bet against policymakers trying to cobble together short-term fixes and relative-return investors desperately seeking a stable economic cycle that they might latch onto. Most investors won’t own inflation plays until it is too late (and even then they will focus on TIPs or gold ETFs, which we think will be greatly disappointing).