A New Economic Indicator
We have a new economic indicator. When you see Bill Gross on CNBC demanding this-or-that bailout to save his ass, go long. The indicator is 2-for-2 so far. The Treasury department bailed Gross out of his Fan-Fred exposure, and the Fed just bailed him out of his AIG CDS positions. Both bailouts came almost immediately after he appeared on CNBC with his suggestions – or instead of “suggestions” maybe I should say “announcements of new federal policy.”
Watch the comments for updates throughout the day.
somehow i just feel the employment report will be worse than before. when it is announced tomorrow. ok that’s it
George – if you get interested in currencies et.al. you might want to peek at MacroMan’s blog out out of London. Analogous here but here’s trading all sorts of stuff on the world markets including currencies.
And the best history review on a single screen plus dissection of the problems is the TheEpicurianDealmaker’s KT-Boundary. He’s obviously a very experienced IB type running a boutique. I know more than a bit of the history and the econ stuff and everything he says checks out with everything I’ve been able to dig up and then some.
I’d post URL’s but it’s easier and faster to just give you the blog names.
Oh, before I forget. Last two bear rallies where based on sentiment and mis-perception IMHO. “This time it’s fixed and now we’ll get back to business”. Don’t think that meme has entirely gone away but do think it’s badly corroded If so then the dynamics may change a little on you. We were all expecting a bump up today for example and got an almost perfect d-day. Thought the MaTTrindicator was telling us the truth yesterday and didn’t look very strong at close to my feeble mind. Matt ?
K,
Look for a coin-collecting store in your area. They will probably have some gold and silver coins. If not, they can probably tell you were to find them.
Matt
You should be able to buy bars or ingots at your local coin store,you might pay a bit over spot but if your bullish on silver that premuim should be nothing
Dblwyo,
The TRIN has come off of its overbought condition, but not by very much. The TRINQ is now on an oversold reading, but that hasn’t been helping the NAZ. No indicator is perfect, and there are times that they won’t work right. This is probably one of them.
Matt
ahh, i muffed it by selling calls on my qid, it looks like…i had 3 this and that stocks that continued to make a mess in my account, counteracting the good moves i’ve made…, all down again today…(bce.to mgu and uts.to)…had some gold shares that were hedged, some unhedged, etc. etc..
anyway, i ca$hed out of all except my bce.to (only down 3 bucks, even with a pending takeover)…yuck, broke even today, maybe a slight loss…
need to cool it a bit on the mtks, unless golds go back down again and the markets rebound a lot, i’ll stay with my bce.to (cross fingers and toes the takeover goes through) and ca$hola…mostly Can $…
at least i can look at my brokerage statements and not fall off the chair…
it’ll sure be interesting to see where we go from here…
bailout nation is worrisome though, isin’t it…how much can the gov’t take on ?
after you hit the nail on the head,how many leaks in the dike can the gov.plug before hte dam breaks,it is getting very,very close..
On today’s trading, looking at what happenned:
AIG was bailed, financials went down. Financials did not make a new low, not even reaching the low set yesterday. As Matt said, this seems like a successful test.
The Dow and S&P 500 both made new lows after a gain yesterday, with huge losses and an ugly close. The Russell 2000 performed similarly, but is still above its July low.
Gold had a record-breaking day, gold companies were also up. Most other commodities were up, but most commodity and energy companies finished down.
People were begging for short term treasuries, with rates reaching 0%. Demand on all treasuries was up.
VIX up 20%, from 30.30 to 36.22.
USD down vs most currencies.
“Stagflation” anyone?
Also, I think the most negative news was as Karl said on his video: the FED is clearly running out of money.
do you guys think having a few ounces or a bar or 2 is worth it as a hedge? any of you have any physical gold and not gold stocks?
I’m being too cautious here but am just looking at options in case this takes the turn for the greatest depression ever. of course you might suggest i get a gun if that’s what happens lol
anyone thinking of getting into DGP ?
after today’s 25% bounce it seems like all the technicals I watch are perfectly aligned
Thing is that there is a clause on GLD, etc., that say it can be revoked on a gold seizure. Or something like that… at least so I hear.
The FED does not run out of money. The US Treasury can loan , contribute etc to the FED’s balance sheet. That was main reason for Gold move,,,the FED is going to start pumping like crazy (which they have NOT done during this meltdown) . Also Treasury wants FED to pay banks interest on their reserves…that is something!
what is DGP ?
re GLD, i dunno either way…what about CEF ? half gold half silver, or thereabouts…might be a better nights sleep with that one ?
after- http://finance.yahoo.com/q?d=t&s=DGP
wow CEF seems nice too
K go to happy hour and save a few bucks and buy a silver round.But if your sreious there is nothing wrong buying a 100 oz bar and holding it for a year or 2.Could off set your AAPL holdings
Dblwyo;
Thanks for the website tip.
I did a practice FOREX account a couple of years back and did well. I used the same trading method as now except I required 3 time frames to line up.
After seeing gold spike in the morning (and after about a month of battering of gold for some reason) I did buy some DGP (which is 2x gold) as a small hedge against the possibility that this would be the turning point. Seeing the rise this evening, I might buy a little more. But, remember that DGP is not physical gold. CEF is a combination of physical gold and silver (at the historical ratio of 1:50 oz). It is a long running fund in Canada.
jayJ,
I guess I should have chosen my words more carefully. What I meant was that they were out of Treasuries.
As I understand it, when the US wants to spend more money, the Treasury Dept issue Treasuries. The FED controls the money supply by deciding how much Treasuries to sell and how many to keep in reserve. If the FED runs out of Treasuries, they can’t create money. They would have to sell the cr*p collateral that they have received instead (or recall loans).
So essentially, when they are out of Treasuries, they are pretty much kaput. They need the US to keep issuing debt.
Of course, as I said, this is my understanding of it and I’m not a professional.
CEF , is price to book correct !!!
.79
That is, the FED would have to recall the treasuries that they loaned to the banks and give the banks back the collateral CDOs, MBSs, etc. that the banks gave to the FED as collateral or the FED would have to sell the collaterla themselves (not sure if they are allowed to).
Paul, you are correct. Newly issued bonds are sold by the treasury and this increases our debt since they sell newly created bonds. The Fed does not buy/sell newly issued bonds. They operate on the open market only. When the FED buys/sells bonds it changes the money supply, but not the debt since they are buying/selling bonds that were already created by the treasury. They just happen to have a crap ton of bonds they have built up over the years. Of course, now they traded them all for crappy mortgage packages…greeaaat.
We can run up such a huge debt because the rest of the world keeps buying our newly created bonds. I suspect after all is said and done in the next few years, that will change. That will be our true time of reckoning.
Gold may no longer be “just another commodity”
http://themessthatgreenspanmade.blogspot.com/2008/09/gold-may-no-longer-just-another.html
towelie,
So if the US stopped issueing debt (never gonna happen, but this is theorethical), and the FED traded or sold all of their existing Treasury stock, then they couldn’t make any more loans, is this correct?
I could be wrong here – I am just reporting what I hear. Today was the first time *in history* the Fed had to ask the Treasury for a loan. Again, just what I hear… I don’t have a specific source I can cite.
Also some treasury or other (haven’t looked it up yet) actually had its yield go negative at some point today.
Of course there is the whatever money market fund that was valued at ninety-seven cents.
This normally smells like a panic bottom is close but dang this is some spooky stuff. And I hear the Fed now “lied” about lending to LEH. They actually lent $40 billion and said they didn’t until today when they legally had to report it.
Not only that, but the Fed is trying to encourage China to buy US financial firms.
I don’t want to be a fearmonger… just passing along what I hear.
interesting . a bounce for the next week or month? or day at least
http://bespokeinvest.typepad.com/bespoke/2008/09/multiple-4-decl.html
or is this a very different time.
Zen,
I heard all of the same things, but mostly from CNBC. The Lehman bit I heard on Karl’s youtube video. I regard all of the above (with the ecception of the Treasury “loan” or whatever) as unconfirmed .
“something goes down it has gotta go back up. folks at home have to listen to that” that was on fox news. talk about encouraging people
Paul, as far as I know, yes. I want to say the FED holdings were around 800 billion. Scary thought.
Keep in mind my credentials: I am some guy named “towelie”…if you don’t watch South Park, just do a google image search….
Well, on the bright side, this finally means Bernanke might have started trying (or has been forced) to inflate us out of this. I say bright side, because he has always appeared to indicate that was his plan…but up until now the treasury has not been called upon to go into overdrive. That dichotomy always bothered me.
PaulF – Here is the info via Bloomberg tonight ,,,Treasury transfered $100 billion to the FED’s balance sheet……
“A day after Fed officials seized control of American International Group Inc., the Treasury yesterday acted at the Fed’s request to fortify the central bank’s balance sheet with $100 billion in new cash. Fed officials can use the proceeds to pump money into financial institutions fearful of lending to each other, or to catch the next insolvent bank that’s unable to raise capital”
It can be treasuries and or new currency in circulation , when all said and done it is just a book entry from one Gov’t account to another