Monday, October 18, 2010

Fed's POMO Burns the Shorts Once Again

The Fed's POMO was successful once again today as the Fed continues to pump dollars into the primary dealers by buying billions in treasuries from the banks.  The PD's then take that money and buy risky assets like stocks and gold.  This explained today's reversal.

Here are the numbers from today's POMO:

My Take:

You can see an immediate correltation in bonds as the POMO's were wrapped up.  Take a look at the 30 year right around the 10-11:00 hour as this sham was completed:

Gold also ramped as this monetization of our debt via POMO was completed this morning:

The Bottom Line:

I think there are a few more POMO's scheduled this week.  Short at your own risk here.  I will keep some hedges short as protection but that's about it.

You have two choices in a market like this.  Go long and buy total piece of crap stocks that are being constantly pumped up to ridiculous valuations by the Fed OR stay in cash.

I will play their game by owning some metals which should also benefit from the Fed's POMO donations to the big banks.  I figure at least I will own something of value when the music stops.

Don't be fooled here folks, these POMO's are PURE printing and it helps explain why you have seen gold soar to $1350 this year. 

The reality here is this printing is unsustainable and it will end up destroying our currency which coincidentally proceeded to drop like a rock following today's action by the Fed.

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