Take some time out of your night to watch this warning by Tony Robbins. I couldn't agree more with Tony here when it comes to his take on the economic change that we are all about to witness.
We should all take notice when the most famous motivational speaker in the world comes out and warns us that we all need to get prepared for the "economic winter" that is coming.
Enjoy!
Sunday, August 15, 2010
Friday, August 13, 2010
Bond Surge Continues
Heading out for the weekend but I wanted to post a few things before I take off.
The market has been pretty quiet today except for bonds which seem to move higher on an almost daily basis.
Just take a look at the 10 year the past couple weeks:
Pretty historic stuff.
David Rosenberg
Famed economist Daid Rosenberg discusses the likely hood of a "double dip" recession. He also does a great job explaining why most of the economists have gotten it wrong throughout this crisis.
What I find humorous here is the two bulltard economists that follow David used the same failed economic analysis that David warned about earlier in the piece as they both attempted to explain why Rosenberg was wrong.
Sigh....Stupidity at it's finest.
Other Reads
- 10 Reasons to worry. Great piece from the Wall St Journal why the market may crash.
- AP did a story describing how the majority of the TARP bailout ended up going overseas. This article made me want to vomit but I am not surprised:
"WASHINGTON — The $700 billion U.S. bailout program launched in response to the global economic meltdown had a far greater impact overseas than other countries' financial rescue plans did on the U.S., according to a new report from a congressional watchdog.
Billions of dollars in U.S. rescue funds wound up in big banks in France, Germany and other nations. That was probably inevitable because of the structure of the Treasury Department's program, the Congressional Oversight Panel says in a new report issued Thursday."
- Hoenig lashes out at his Fed colleagues. Disagree with his argument but it's interesting to to see that there is some definite tension within the Fed. I guess this is to be expected as their recovery policies continues to fail.
The Bottom Line
I didn't go short today. I still believe we might get one more burst higher before things unravel. The bond trade tells you the market is still scared to death as it continues to price in deflation.
Something else that caught my attention today was the drop in the Euro vs. the dollar despite the fact that Germany knocked it out of the park when it announced it's best economic growth in 23 years.
Shouldn't the Euro have taken off on such news? Hmmmm...Trouble in PIIGSville perhaps? Greek debt sold off again today.
Keep your eyes on what's going on in Europe.
That's it for me this week folks. Been an interesting week to say the least. I hope everyone has a wonderful weekend!
Edit:
Just picked up this classic rant from Rick Santelli who actually quoted Zero Hedge in the piece. The housing nightmare is described perfectly in a nutshell by Rick in the last 2 minutes of the video:
The market has been pretty quiet today except for bonds which seem to move higher on an almost daily basis.
Just take a look at the 10 year the past couple weeks:
Pretty historic stuff.
David Rosenberg
Famed economist Daid Rosenberg discusses the likely hood of a "double dip" recession. He also does a great job explaining why most of the economists have gotten it wrong throughout this crisis.
What I find humorous here is the two bulltard economists that follow David used the same failed economic analysis that David warned about earlier in the piece as they both attempted to explain why Rosenberg was wrong.
Sigh....Stupidity at it's finest.
Other Reads
- 10 Reasons to worry. Great piece from the Wall St Journal why the market may crash.
- AP did a story describing how the majority of the TARP bailout ended up going overseas. This article made me want to vomit but I am not surprised:
"WASHINGTON — The $700 billion U.S. bailout program launched in response to the global economic meltdown had a far greater impact overseas than other countries' financial rescue plans did on the U.S., according to a new report from a congressional watchdog.
Billions of dollars in U.S. rescue funds wound up in big banks in France, Germany and other nations. That was probably inevitable because of the structure of the Treasury Department's program, the Congressional Oversight Panel says in a new report issued Thursday."
- Hoenig lashes out at his Fed colleagues. Disagree with his argument but it's interesting to to see that there is some definite tension within the Fed. I guess this is to be expected as their recovery policies continues to fail.
The Bottom Line
I didn't go short today. I still believe we might get one more burst higher before things unravel. The bond trade tells you the market is still scared to death as it continues to price in deflation.
Something else that caught my attention today was the drop in the Euro vs. the dollar despite the fact that Germany knocked it out of the park when it announced it's best economic growth in 23 years.
Shouldn't the Euro have taken off on such news? Hmmmm...Trouble in PIIGSville perhaps? Greek debt sold off again today.
Keep your eyes on what's going on in Europe.
That's it for me this week folks. Been an interesting week to say the least. I hope everyone has a wonderful weekend!
Edit:
Just picked up this classic rant from Rick Santelli who actually quoted Zero Hedge in the piece. The housing nightmare is described perfectly in a nutshell by Rick in the last 2 minutes of the video:
Thursday, August 12, 2010
Wall St Goes Long Deflation
I thought I would start with a little video from Gary Shilling who has been calling for deflation since this crisis started in 2007.
Gary does a great job here explaining why deflationary is so devastating and also gives some great advice on how to invest in a deflationary environment:
My Take:
Gary pretty much nails it. It appears the street was listening if you look at today's 30 year bond auction:
"NEW YORK (MarketWatch) -- The Treasury Department sold $16 billion in 30-year bonds on Thursday at a yield of 3.954%, the lowest since March 2009. Investors offered to buy 2.77 times the amount of debt sold, compared to an average of 2.44 times at the last four new sales of 30-year bonds /quotes/comstock/31*!ust30y (UST30Y 3.94, +0.02, +0.43%) . Indirect bidders, a group that includes foreign central banks, purchased 46% of the auction, versus 38.3% of recent sales, on average. Direct bidders, a class that includes domestic money managers, bought another 18.6%, compared to 16.7% on average. The broader bond market remained lower after the auction, the last of the week. Yields on 10-year notes /quotes/comstock/31*!ust10y (UST10Y 2.75, +0.06, +2.12%) , which move inversely to prices, rose 2 basis points to 2.74%."
Take Continued
I'll be honest here. I was glad to see this auction go so well. I had posted on here a few days ago that the the Fed may have incited a panic by avoiding the 30 year bond with it's announced purchasing of treasuries.
After getting a chance to digest the FOMC announcement I became less concerned because the Fed is not going to be purchasing huge amounts of bonds. I believe the number is only about $20 billion a month.
The feeding frenzy seen in the 30 year auction today pretty much confirms that the fear of deflation overrides anything the Fed announces which is kinda scary when you think about it.
Perhaps the market is beginning to tune out the Fed and as they begin focusing on the deflationary mess we have gotten ourselves into?
I believe so. The fact this auction went so well tells me that some investors consider the Fed to be impotent at this point.
They are smart if they start looking at the Fed in this light. There really isn't anything else they can do at this point. If they do QE(and I am sure they will at some point) it's not really going to matter because none of the money can get into the real economy.
It's pretty clear that the banks have no desire to lend at this point. Why waste the money if it can't get into the economy.
Common sense doesn't matter here though because the Fed is obsessed with stopping deflation so I full expect more quantative easing.
Another QE would just be another win for the banks and another loss for Main St because we are the ones that have to pay it off. Should we be surprised at this point?
The bottom line here is the money supply will still shrink either way because it cannot expand unless people and companies are borrowing the money and putting it into circulation.
The Bottom Line
The bond market told you that the deflation trade is still definitely on. The Fed's treasury purchases probably aren't even needed at this point as the economic data continues to spell deflation.
Perhaps they should use this money to pay down our national debt instead of wasting it on securities that already have high demand.
Maybe they should sock the money away and use it to feed the millions of unemployed as they run out of their 99 week of jobless benefits.
God knows we will need it after seeing the today's weekly jobs report:
From Haver:
"The bad news about the labor market continued today. The Labor Department's report that initial claims for jobless insurance rose to 484,000 last week from an upwardly revised 482,000 brought them to the highest level since February. The four-week moving average of initial claims which smoothes out some of the w/w volatility rose to 473,500, also the highest level since February."
Get ready for a lost decade folks. It's heading straight towards us like a freight train.
The only way to play this in the markets is to get out of stocks as Gary says and either buy bonds or short stocks over the longer term.
Going short can be very difficult to stomach at times because you have to fight constant government interventions as well as the slick Wall St trading wizards/HFT traders so enter this trade at your own risk.
I am still bullish on bonds. Yields should keep dropping now that the Fed has spoken. The only risk here is if the bond market begins to focus on our deficits and starts taking rates higher. If they do this we could pull a "Greece" rather quickly.
Cash will also be king in this deflationary environment as the money supply shrinks. The dollar will buy you much more in this world than it does today.
Interestingly gold shot up today which was kinda strange. Gold often struggles during deflationary times. This tells me people are still very afraid and don't have a lot of confidence in anything right now. I will hold onto the gold I own because I am scared too!
One other thing worth noting: Technically speaking we had a Hindenburg Omen today. This is not good if you are a bull. Hindenburg's are made when a certain percentage of stocks hit 52 week new highs at the same time others are hitting 52 week new lows.
Historically this is ugly for the markets according to Wiki:
"Looking back at historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77%, and usually takes place within the next forty-days."
Those are nice percentages if you want to go short. I hope we see a nice bounce tomorrow because plan on buying some shorts on any upward move. I plan on buying some SDS and a few PUT's because I love these odds.
Disclosure: No new positions at the time of publication.
Gary does a great job here explaining why deflationary is so devastating and also gives some great advice on how to invest in a deflationary environment:
My Take:
Gary pretty much nails it. It appears the street was listening if you look at today's 30 year bond auction:
"NEW YORK (MarketWatch) -- The Treasury Department sold $16 billion in 30-year bonds on Thursday at a yield of 3.954%, the lowest since March 2009. Investors offered to buy 2.77 times the amount of debt sold, compared to an average of 2.44 times at the last four new sales of 30-year bonds /quotes/comstock/31*!ust30y (UST30Y 3.94, +0.02, +0.43%) . Indirect bidders, a group that includes foreign central banks, purchased 46% of the auction, versus 38.3% of recent sales, on average. Direct bidders, a class that includes domestic money managers, bought another 18.6%, compared to 16.7% on average. The broader bond market remained lower after the auction, the last of the week. Yields on 10-year notes /quotes/comstock/31*!ust10y (UST10Y 2.75, +0.06, +2.12%) , which move inversely to prices, rose 2 basis points to 2.74%."
Take Continued
I'll be honest here. I was glad to see this auction go so well. I had posted on here a few days ago that the the Fed may have incited a panic by avoiding the 30 year bond with it's announced purchasing of treasuries.
After getting a chance to digest the FOMC announcement I became less concerned because the Fed is not going to be purchasing huge amounts of bonds. I believe the number is only about $20 billion a month.
The feeding frenzy seen in the 30 year auction today pretty much confirms that the fear of deflation overrides anything the Fed announces which is kinda scary when you think about it.
Perhaps the market is beginning to tune out the Fed and as they begin focusing on the deflationary mess we have gotten ourselves into?
I believe so. The fact this auction went so well tells me that some investors consider the Fed to be impotent at this point.
They are smart if they start looking at the Fed in this light. There really isn't anything else they can do at this point. If they do QE(and I am sure they will at some point) it's not really going to matter because none of the money can get into the real economy.
It's pretty clear that the banks have no desire to lend at this point. Why waste the money if it can't get into the economy.
Common sense doesn't matter here though because the Fed is obsessed with stopping deflation so I full expect more quantative easing.
Another QE would just be another win for the banks and another loss for Main St because we are the ones that have to pay it off. Should we be surprised at this point?
The bottom line here is the money supply will still shrink either way because it cannot expand unless people and companies are borrowing the money and putting it into circulation.
The Bottom Line
The bond market told you that the deflation trade is still definitely on. The Fed's treasury purchases probably aren't even needed at this point as the economic data continues to spell deflation.
Perhaps they should use this money to pay down our national debt instead of wasting it on securities that already have high demand.
Maybe they should sock the money away and use it to feed the millions of unemployed as they run out of their 99 week of jobless benefits.
God knows we will need it after seeing the today's weekly jobs report:
From Haver:
"The bad news about the labor market continued today. The Labor Department's report that initial claims for jobless insurance rose to 484,000 last week from an upwardly revised 482,000 brought them to the highest level since February. The four-week moving average of initial claims which smoothes out some of the w/w volatility rose to 473,500, also the highest level since February."
Get ready for a lost decade folks. It's heading straight towards us like a freight train.
The only way to play this in the markets is to get out of stocks as Gary says and either buy bonds or short stocks over the longer term.
Going short can be very difficult to stomach at times because you have to fight constant government interventions as well as the slick Wall St trading wizards/HFT traders so enter this trade at your own risk.
I am still bullish on bonds. Yields should keep dropping now that the Fed has spoken. The only risk here is if the bond market begins to focus on our deficits and starts taking rates higher. If they do this we could pull a "Greece" rather quickly.
Cash will also be king in this deflationary environment as the money supply shrinks. The dollar will buy you much more in this world than it does today.
Interestingly gold shot up today which was kinda strange. Gold often struggles during deflationary times. This tells me people are still very afraid and don't have a lot of confidence in anything right now. I will hold onto the gold I own because I am scared too!
One other thing worth noting: Technically speaking we had a Hindenburg Omen today. This is not good if you are a bull. Hindenburg's are made when a certain percentage of stocks hit 52 week new highs at the same time others are hitting 52 week new lows.
Historically this is ugly for the markets according to Wiki:
"Looking back at historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77%, and usually takes place within the next forty-days."
Those are nice percentages if you want to go short. I hope we see a nice bounce tomorrow because plan on buying some shorts on any upward move. I plan on buying some SDS and a few PUT's because I love these odds.
Disclosure: No new positions at the time of publication.
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