Treasuries are surging (short / long term notes) over the past couple weeks, the market is already starting to figure in a rate cut. Majority Traders / analysts had expected FED tightening, many still do to prop up the dollar and attract more foreign investors to buy our debt.
However, with futures rallying (yields dropping), it is almost a given that FED will cut, the real question is how much?
The FED would not consider cutting to bail out the markets (banking / financials) due to poor judgement. This is what the *free* market is suppose to do and work through the good and bad, FED intervention on this basis would be wrong, however, there is very strong evidence U.S. could fall into a recession and this could also trigger a global recession, something the FED will want to avoid at all costs. Failure for the FED to act accordingly now could put U.S. in a deeper recession and take much longer to recover.
AHM announced today they will seek bankruptcy protection, 7000 employees to lose their jobs. Several banks along with financials are in the same situation. BSC 3 hedge funds are now worthless, around 3 billion dollars...Home Builders have nose-dived, housing glut on the market, 7 million homes purchased in the last 2 years on tzr loans, no equity and with Mortgage rates rising (Wells Fargo announced Jumbo rate @ 8%). This is just the tip of the ice burg. More foreclosures, will be at record highs, this will add to the already saturated housing market, depressing prices further. Any monetary easing will result in further depreciation of the U.S. dollar and metal prices to rally sharply...this is likely the reason the metals were up strong today (Gold up $9 and Silver 16 cts)...with an ease in monetary policy, PM's would rally and the shorts just might be overwhelmed and have to cover.
The fed cut would cause instant rally in the DOW and other indexes, however I am very convicted in the position that 14,335 area (give or take) will be a major top. Even with the FED easing now, I think too much damage has occured and the markets will still ultimately have to pay the consequences. This cut would result in a sharp short covering along with (ave) investors buying into the market, the DOW could rally 1000+ easily in a week...after breaking into new highs, there will be little buyers remaining which will result in a vacuum.
As for SLW, with the somewhat disappointed earnings (due to downward revision of sales) and market imploding, settling at 13.25 held very well. On the daily chart there is a case to retest lows at $12.87, a very nice falling wedge is forming which will send prices to new highs once this last low is in place. Monday may present a great opportunity to add to long position.
I am also long PAL as chart is setting up for a massive breakout to the upside, MMG also looks promising.
Good Luck next week.
when all of this comes to a head and economy slides into a deep recession, markets collapse, prices will fall just as hard. As for OIL, you make it sound like this makes up the entire inflationary basket. Hedge funds? Hmmm...we'll see just how many hedge funds remain standing. A weaker dollar does not forecast or trigger inflation. An economy growing out of conrol, rapid spending and consumption, and all of that is about to end. As I said before, if inflation were truly flying high, so would treasury yields. You own your house? If you see your house drop in value by 50%, tell me again about inflation ok, about you paying a mortgage twice what your home is worth. The US economy has likely peaked and the market is under the pretense that a rate cut will be in the offering and rekindle growth. Rate cuts don't occur at market tops...When Bernanke moves away from his "hawkish" stance due to inflation, then you can also tell me he has his numbers wrong..
"But right now, the core inflation is only 1.9% (that is pretty low) by anyone's standards unless you suspect that data from the Gov't is massaged."
Suspect? LOL Better do some research my friend. It's not just massaged, it's completely bogus in terms of what the actual prices the consumer pays.
"As to OIL, gas and food, yes these have risen but for Oil / gas, these are also subject to seasonal trends, we could very well be topping out in Crude."
You call a 60% yearly oil increase "seasonal trends"? You really do buy the nonsense put out by the gov't - (read politicians and bankers)
"For true inflation to occur, it requires all goods across-the-board to rise over time, not just specific markets spiking at cyclical highs"
None are so blind ..... We aren't arguing over implications based upon the same set of facts. You choose to rely upon data that I reject as being manipulated for political reasons, naturally then we would disagreed. What you're asking is that I believe the gov't instead of my own eyes. Sorry, no takers here. LOL
BTW - "CRB index is down 11% from last year." Have you hear about something called hedge funds and about them speculating on the commodities? Just a thought.
obviously there are those in one camp who see current and future conditions to be inflationary (as dollar erodes).
There are those who see a deflationary cycle. But right now, the core inflation is only 1.9% (that is pretty low) by anyone's standards unless you suspect that data from the Gov't is massaged. As to OIL, gas and food, yes these have risen but for Oil / gas, these are also subject to seasonal trends, we could very well be topping out in Crude. For true inflation to occur, it requires all goods across-the-board to rise over time, not just specific markets spiking at cyclical highs. Home values will depreciate signficantly, we are already seeing evidence to that. Other goods will decrease as well when the consumer finally reverses direction and stops spending. Exports to the US will also slow down if our dollar depreciates, it is not to our advantage to buy goods with low purchasing power, nor is it in other countries interests to export as much as before since their return will be less. Recession in U.S. will also cause a slow-down in many of the other global economies. As to commodity prices, you need to look at the entire basket and not just Oil. CRB index is down 11% from last year. Also, if there were real inflationary concerns, Tbonds would drop & yields rise, the reverse is occuring right now...long term chart on Bonds is making a strong case interest rates will drop significantly. Bernanke (who is more of an inflationary addict then Greenspan) will also forgo his inflationary model and loosen the Fed's purse strings. Just because I am looking for deflation doesn't mean the metals will suffer, if economic conditions unfold as many predict, hard assets will be a safe haven. The economic growth in U.S. is based on credit expansion then Global demand and as economy starts to slow down, you'll see this in earnings reports as slower growth works its way into the economic data.
"ahhh...but there you said it, "present rate", core inflation slipped back down to 1.9%.'
Sorry, I should have been more clear - I meant in real numbers! Oil is up what, 300% in the last couple of years? Maybe my "present rate" takes in more than the last close on the market.
"Oil has turned south (trading at $74)"
I'm trying to decide if you are serious, using market and seasonal fluctuations to prove a trend? You ask the guy who needs to fill up his SUV for the 75 mile daily commute to work about how much cheaper energy is nowadays. As far as the Saudi's ability to "force prices lower", you saw their best try last week. There are experts in the oil industry who suspect (Saudi oil production numbers are a state secret) the Saudi's have passed peak production on their major fields and besides jawboning lack the ability to force prices alone. Have you heard about the Chinese building huge oil containers to store a stratgic reserve? If oil goes down the Chinese will be there to bid it up.
"Rising unemployment, home values sinking, potential slowdown in the economy, it will be really difficult to make a case for inflation, ..."
Why? Were you under the impression that growth in the U.S. economy was driving commodity prices higher? Well, got some news for ya' - it just ain't so. You got to get your head around the fact that U.S. demand isn't driving commodity prices any longer. However, as the dollar falls the foreign producer will want more of those dollars for their production, whether U.S. business activity falls or not. Yes Virginia, there is going to be a recession in U.S. business activity, but simultaneously there will be increases for energy and other imported products. The absolute worst possible scenario.
"Inflation or Recession?", you ask as though they are somehow exclusive of one another.
Return to the mid 70s here in the US Ovay or the Weimar Republic. The Bobsey Twins are often seen together.
The Federal Reserve will continue doing what it has always done; wringing the wealth out of the non-elite echelons of our society. They have not a care, but seemingly have predilection for inflation because it more rapidly fill their coffers.
Bubba don't know and Bubba don't care. Gotta go...wrastlin' is coming on.
Gold continues to be a very attractive component in any portfolio for three reasons.
1. The dollar has been weak and is not rallying during times of crisis.
This is not historically the norm. The dollar usually attracts buying when people sell speculative investments and seek the security of US Treasury paper. Currently due to the sub-prime crisis, once again they are buying US Treasury paper for security (you can tell this because the yield on US government paper is falling). However, they are hedging out their dollar exposure. Obviously they just want the security of the US government guarantee; they don't want the US dollar.
2. The prospect of inflation is continuing to grow. China, India and others are beginning to export inflation and this will only increase when their currencies rise more rapidly. It is rising at the rate of about 6% a year but congress wants more. Congress should be careful what they wish for. They may not realize it, but a rise in the Chinese currency will cause US inflation.
3. This is a strong seasonal time to buy gold.
by Monty Guild of Guild Investments
SLW 12.99 dn .26 cents on 2.6 million shares. Very nice close and a positive one above a key Fibonacci number but the volume was not impressive on either the buy or sell side. The internals still not signalling a turn on the daily yet, but it should begin to show some strenghtening pronto... albeit I expect a strong test of today's low possibly on one of those classic 'W' shaped bottoms. The last candle was also a positive hammer so I believe today's low should hold, whether it's tomorrow, or next week, because it looks like there's a little work left just to clean up a few loose ends. Congratulations on all those who picked up their bargains today! :)
I believe inflation comes first, and the recession will follow later after a very large rally in gold. Beyond that, I don't even like to think about it as long as the FED refuses to handle the dollar responsibly instead of for their own agenda. But they won't change anything. IMHO... they will do nothing at all, other than print more dollars and leave the interest rates alone until the market forces them to raise rates either late this year, or early next year.
No cut coming - Hold Pat.
Treasuries are losing buyers, if they cut the rates, forget it. Raising rates will wipe out housing in one fell swoop and you will see a 1000 point sell off in one day. The Fed has to walk the tightrope for as long as they can get away from it.
There is no reason for the SLW selloff being so overdone. Silver is holding and SLW's production numbers weren't bad enough for all the nonsense. The technical charterists are being played by the chart painters in the afternoons. All of ya'll are being played like a fiddle to drive the price down. When it turns its going to turn faster than most can get back in. SLW is an accumulate on dips, hold and forget.
No Surprise Here except for traders.
If the Fed either raises rates or lowers them, the house of cards falls. The Fed is going to hold until something in the picture changes to the point that the answer is made up for them and then "you can't blame them". The Bush Administration and this Federal Reserve Board is right out of Ayn Rand's "Atlas Shrugged". Read it soon because it is your future.
... and the daily chart shows no signs of a bottom yet. So, buyers beware! Hey davie... did you notice the 4 star rating on jthorp's dissing of both of us? What a 'revolting developement this is'!!! And I thought we were so popular and enjoying the 'Life Of Riley' :) It appears a few of the populace enjoy the dirty mouth stuff and like to get in on the laughs. Now you can see what the average IQ is on these talk-a-thons! Precisely why I tell people to look elsewhere for advice on the markets. Too many KOOKS are posting and most just lurking. That may actually be a good thing when I think of it. Maybe those folks are just here for a laugh and not at all interested in any of the chatter and noise we all generate whether it's folly or legitimate opinion. Maybe the mob is better informed than they pretend to be. But I don't really believe it for a second myself. The mojority couldn't pass a saliva test for entry into a home with rubber rooms. I think that part of the species lives under bridges and sleeps on the concrete streets covered with cardboard, or in those open fields at night. Heck, every library has free computers for use by anybody! Just havin' a little fun with you jokers. The laughs are better on this end, cuz the material can't be written. It has to come from real idiots that like to express what they don't understand by showing their depressing futility in the strange world of markets that cause them too much pain. Keep your heads up and don't hang your feelings of depression on your sleeve. Things can only get better if you hold your head high and don't allow yourself to fall into the trap of a jthorp sleezebag. To eveybody, even the lowly creeps, my very best and hope you all make lots of money and have a speedy recovery. :)