Friday, November 20, 2009

Fed "Independence"

A quick note on this topic -

The only thing the Fed is independent of is oversight from those who fund it.
If you think that the Fed is independent from the banks who use it to fund their speculation and clean up their messes, then you are either not paying attention or are bought and paid for by these same banks (Barney Frank, Chris Dodd or a CNBC anchor).

Why Is The T-Bill Yield Negative?

The yield on the 1-month T-Bill went negative yesterday.
The yield of the 3-month T-Bill slipped below that of the 1-month - an invested yield curve. Yikes…

There is a lot of speculation as to why this occurred. Here are my two cents –

Ukrainian Railway defaulted on a bond payment on non-government guaranteed debt. There is speculation that it will now default on a note guaranteed by the Ukrainian Government.

The Bearish camp would say that there is a new panic forming and investors are willing to pay the Fed to find safety in Treasuries.

If things are so bearish and a new panic is setting in, then why was LIBOR actually DOWN yesterday?

The Dollar Carry Trade is in full force. The trade is that you buy US Treasuries and leverage the hell out of them. Your cost to borrow is the yield on the security you are leveraging. With a negative yield, you are now actually GETTING PAID to borrow Treasuries and hold them to maturity.

The Bullish camp would say that Treasury yields are now negative because so many people want to borrow them that they are driving the yield negative. Bond Price Up = Bond Yield Down

I tend to be more in the Bullish camp and think that people are loading up on leverage for one last speculative push into Year End 2009.

The fact that the Carry trade may be so crowded that T-Bill Yields are now negative may be a good indicator that prices will reverse soon (the law of large numbers and all), so be on your toes. Everything still needs to be a trade.

We’ll see how things shake out, but I am looking to buy stuff with the money I raise by selling SLV and HL earlier this week, not sell more stuff to raise more cash.

I will be posting a lot of charts this weekend.

Do You Really Think These Students Will Put Your Social Security Above Their Cost Of Living Expenses?

UC Regents voted to raise fees by 32% yesterday.
They cast the vote at UCLA.
A lot of students showed up to protest.

“We weren’t allowed to leave,” said Student Regent Jesse Bernal. “(The situation) just became a little too intense for the police officers.”

They took over a building.

They held signs like -

Bailout Education
First (crossed out) Last Gen College Student

There is no way that the kids hit college today will pay for the Retirement (Social Security and Public Pensions) or Health Care (Medicare). They will have to figure out how to pay for their own lives on incomes that will not match what their parents made.

You better be planning on how to self-finance your retirement years, because those checks you were expecting from the Government will be a lot smaller than you thought, if they show up at all.

Monday, November 16, 2009

Nice Day Today

Today was a great day. It felt like NASDAQ 1999 – “ 2.0”... This is a glorious Commodity Bull Market.

I’ve been working since 5 am. I knew this would be a busy week and I wanted to make sure that I was ready for it. Most of my preparation for this week was done last week, when I bought gold stocks (NEM, ABX, RGLD), Silver (SLV) and Natural Gas (UNG).

The Dollar keeps imploding and virtually anything else with potential risk goes higher. So my logic is that if prices are moving up because the Dollar is going down, then why not own the pure plays that benefit most from a falling US Dollar.

Silver (SLV) pulled back into the 50-day and then exploded higher today.

Natural Gas (UNG) has been THE lagging Commodity. I have been watching it for months, waiting for a potential entry point. It looks like UNG is trying to put in a Double Bottom at $9. There is a big divergence between Price and Momentum (Green Line). UNG had a nice pop today.

Hecla Mining (HL) is a riskier Gold stock. It has been leading and broke out last week. I have tracked it for some time and got paid off huge today. Again, very 1999 tech-like.

Singapore (EWS) has been holding up like a champ, simply building new bases each time the markets pull back. Another nice move today.

Industrials have been in a multi-week base and finally started to break out today.

There were lots of breakouts and now I go to work looking for the next round of potential breakouts. Again, I want to only buy when I have an exit strategy. Look at what is again showing up –

Metals and Mining (XME). Does this remind you of the chart of XLI? It should.

Russia (RSX)

I refuse to chase price higher and buy when the markets are extended. I prefer to do more homework and find other setups that can be bought with reasonable risk.

If you have not participated in this leg, don’t get antsy and do something risky. Do you homework and look for the newly emerging potential setups.