I "bought" a mini-silver yesterday at $17.20 and today it's rocketed up to $17.53; so far, Mauldin's call for deflation has fallen pretty flat. I must say that I'm completely wrong on copper; the march northwards continues unabated, with the close today at $3.55. I don't believe in copper enough to buy, but it looks like my sell order at $3.17 is unlikely to be filled anytime soon. I'm still going to keep the order. With my silver, I'm going to add a trailing ten cent stop.
Today the Fed's MBS purchases ended. We'll see.. if mortgage rates go north of 6% look for Bernanke to act in one fashion or another. There was some talk of transfering a lot of the already purchased MBS contracts to Freddie and Fannie's balance sheets to as to properly allow Bernanke to act.
Across the pond, Ambrose's latest article points out the dangers the UK faces:
"Bill Gross, the fund's chief and emminence grise of bond vigilantes, said the UK was on its list of "must avoid" countries along with Greece and others in eurozone's Club Med.
The flood of British debt is likely to "lead to inflationary conditions and a depreciating currency", lowering the return on bonds. "If that view becomes consensus, then at some point the UK may fail to attain escape velocity from its debt trap," he wrote in his April monthly note. Mr Gross said the UK is not yet in crisis but gilts are sitting on a "bed of nitroglycerine" and must be handled delicately. Spreads on 10-year gilts have crept up to 14 basis points above those of Spain, itself in some difficulty"
http://www.telegraph.co.uk/finance/economics/7542428/PIMCO-fears-UK-debt-trap.html
The scary part here is that it's Bill Gross.. Fund Manager of the Decade.. saying this. PIMCO is a gigantic fund, and Gross steers his ship masterfully. In other words, he's someone we all should listen to when he speaks. At some point, the UK (and most of the industrialied world in fact, US included) will have to suffer the same fate as Spain and Ireland.. severe budget cuts, drastic levels of unemployment.
Wednesday, March 31, 2010
Saturday, March 27, 2010
Update 3/26
I'm now out of both the GBP and Yen trades:
The day's close on the GBP was $1.4886, for a loss of $234.
The day's close on my Yen ETF was 20.99, for a gain of $48.
I've still got the "sell" order on copper @ $3.17
I don't have a real strong sense of where these are going anymore and so I'm glad I'm out of them. There are so many factors that affect these markets. Over the next few months, there are two major events upcoming:
1: In the US, The Fed is ending MBS and Bond purchases this month; there have already been two ugly bond auctions this week, with the interest rate on the 10yr bond going north of 3.9% (up from 3.65% last month), a bad portend for the US Gov't as it needs to borrow money in such staggering amounts. The ten year and thirty year auctions are next week.. could be interesting. Mauldin thinks the 10yr could reach 4.5% by mid May. This is a trajectory that Bernanke simply will not allow. If he does jump in and begin Bond purchases again, look for the USD to tank.
2: Greece is going to need a lot of money to make it thru the end of the year. The new IMF/EU agreement essentially is that Greece (or any other problem child) must first go to the IMF for their bailout, and if any more funds are needed, the EU (if there is a unanimous vote) might provide some funds. This isn't much of a guarantee. Greece will almost certainly have to go to the IMF this spring; the IMF can only provide them $15 billion (and impose stiff budget cuts). What happens after that money is burned thru this autumn is what's key, because Greece will almost certainly need more money to get thru year's end. If the EU stumbles and dithers as they have so far, Greece would be left with little choice other than default. The euro would take a severe hit from such an event.
2a: If Greece were abandoned by their EU brethren, I believe Bernanke would step up and rescue Greece. A severe drop in the Euro would produce deflation here in the US, another scenario Bernanke will simply not allow.
That or.. none of these events come to pass and everything is simply divine..
We shall see. Count me in for #2 and 2a at the very least this year.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7532852/Europe-has-left-Greece-hanging-in-the-wind.html
The day's close on the GBP was $1.4886, for a loss of $234.
The day's close on my Yen ETF was 20.99, for a gain of $48.
I've still got the "sell" order on copper @ $3.17
I don't have a real strong sense of where these are going anymore and so I'm glad I'm out of them. There are so many factors that affect these markets. Over the next few months, there are two major events upcoming:
1: In the US, The Fed is ending MBS and Bond purchases this month; there have already been two ugly bond auctions this week, with the interest rate on the 10yr bond going north of 3.9% (up from 3.65% last month), a bad portend for the US Gov't as it needs to borrow money in such staggering amounts. The ten year and thirty year auctions are next week.. could be interesting. Mauldin thinks the 10yr could reach 4.5% by mid May. This is a trajectory that Bernanke simply will not allow. If he does jump in and begin Bond purchases again, look for the USD to tank.
2: Greece is going to need a lot of money to make it thru the end of the year. The new IMF/EU agreement essentially is that Greece (or any other problem child) must first go to the IMF for their bailout, and if any more funds are needed, the EU (if there is a unanimous vote) might provide some funds. This isn't much of a guarantee. Greece will almost certainly have to go to the IMF this spring; the IMF can only provide them $15 billion (and impose stiff budget cuts). What happens after that money is burned thru this autumn is what's key, because Greece will almost certainly need more money to get thru year's end. If the EU stumbles and dithers as they have so far, Greece would be left with little choice other than default. The euro would take a severe hit from such an event.
2a: If Greece were abandoned by their EU brethren, I believe Bernanke would step up and rescue Greece. A severe drop in the Euro would produce deflation here in the US, another scenario Bernanke will simply not allow.
That or.. none of these events come to pass and everything is simply divine..
We shall see. Count me in for #2 and 2a at the very least this year.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7532852/Europe-has-left-Greece-hanging-in-the-wind.html
Thursday, March 25, 2010
Update 3/25
Copper and the UK Pound are beginning to come down; I'm thinking by week's end I'll get filled on the sterling. My orders were to sell the GBP @ $1.485 and to sell Copper at $3.18. I must say copper has held up surprisingly well, especially yesterday when the brutal new housing numbers came in and the USD soared. Upon advice of one of the best, I'm going to buy the ETF YCS, which is the short yen fund; I'm going to buy at $20.75, and I'm going to buy two hundred of them. An ETF is rather like commodities trading only on the stock markets, though a tad less dangerous. As the Yen goes down, the YCS goes up. This will be a long term trade, with a short term goal of $24.00 and a long term goal of $30.00. The reason is that the Japanese Gov't will do pretty much anything to avoid deflation and watching their exports become uncompetetive.
Yesterday Portugal's sovereign debt was downgraded by Moodys and the Euro tanked, sinking to $1.335/dollar. Ben Bernanke hates watching the USD soar; his main fear is deflation, and he's right to fear it. John Mauldin sees deflation making a menacing comeback and the stock markets tanking some 40%. Given that the EUrocrats are notoriously stuck in neutral when it comes to Greece and other countries in trouble, I still see an IMF bailout for Greece.. with an assist from Ben Bernanke. Portugal will very shortly join the ciesta of shame. In addition, look for Bernanke to do something, perhaps US Bond,MBS and/or states bond purchases, to help defeat deflation. Mauldin sees deflation overwhelming the stock market; I believe Bernanke will do whatever's necessary, including negative interest rates, to tame the deflation lion. Step by step, we're having a race to the bottom, and so far the US, China & Japan are in the lead. Beggar thy Neighbor has arrived: http://themeanoldinvestor.blogspot.com/2009/11/beggar-thy-neighbor.html
Update 4:30pm:
The sterling closed today at $1.4815, so I'm now "short" one sterling contract. My ETF YCS today closed at 21.06, a nifty gain for me today on day one of this trade.
In other news, the EU and IMF have agreed to an aid package for Greece, something I did'nt expect after Angela Merkel essentially told her country "nein" on Greek aid. Interestingly enough, the Euro went down instead of up after this.
The USD is on a tear of late. Worse, there was a bond auction today on the 7 year US Bond, and it went terrible. If the USD continues to soar and US Bond rates continue rising, Helicopter Ben Bernanke will, without the slightest notice or doubt, act forcefully to stop these trends. What Helicopter fears most is deflation and higher bond rates (In my 2010 outlook this was my opening statement). If Helicopter acts suddenly, my Yen and Sterling trades are going to end very ugly. A few more days like this and Helicopter will act.
Therefore, at the close tomorrow, I'm going to exit both the Yen ETF and GBP trades regardless of where they are. In addition, I'm going to place an order to "buy" a mini-Silver contract at $17.20/oz (today's close was at $16.73).
Yesterday Portugal's sovereign debt was downgraded by Moodys and the Euro tanked, sinking to $1.335/dollar. Ben Bernanke hates watching the USD soar; his main fear is deflation, and he's right to fear it. John Mauldin sees deflation making a menacing comeback and the stock markets tanking some 40%. Given that the EUrocrats are notoriously stuck in neutral when it comes to Greece and other countries in trouble, I still see an IMF bailout for Greece.. with an assist from Ben Bernanke. Portugal will very shortly join the ciesta of shame. In addition, look for Bernanke to do something, perhaps US Bond,MBS and/or states bond purchases, to help defeat deflation. Mauldin sees deflation overwhelming the stock market; I believe Bernanke will do whatever's necessary, including negative interest rates, to tame the deflation lion. Step by step, we're having a race to the bottom, and so far the US, China & Japan are in the lead. Beggar thy Neighbor has arrived: http://themeanoldinvestor.blogspot.com/2009/11/beggar-thy-neighbor.html
Update 4:30pm:
The sterling closed today at $1.4815, so I'm now "short" one sterling contract. My ETF YCS today closed at 21.06, a nifty gain for me today on day one of this trade.
In other news, the EU and IMF have agreed to an aid package for Greece, something I did'nt expect after Angela Merkel essentially told her country "nein" on Greek aid. Interestingly enough, the Euro went down instead of up after this.
The USD is on a tear of late. Worse, there was a bond auction today on the 7 year US Bond, and it went terrible. If the USD continues to soar and US Bond rates continue rising, Helicopter Ben Bernanke will, without the slightest notice or doubt, act forcefully to stop these trends. What Helicopter fears most is deflation and higher bond rates (In my 2010 outlook this was my opening statement). If Helicopter acts suddenly, my Yen and Sterling trades are going to end very ugly. A few more days like this and Helicopter will act.
Therefore, at the close tomorrow, I'm going to exit both the Yen ETF and GBP trades regardless of where they are. In addition, I'm going to place an order to "buy" a mini-Silver contract at $17.20/oz (today's close was at $16.73).
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