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Petróleo Brasileiro S.A. - Petrobras Message Board

  • phil_fgv phil_fgv May 11, 2010 8:43 AM Flag

    Remember TARP?

    I don't know if you folks remember, but when Treasury announced it was close to putting together the TARP package one weekend, in 2008, the market had a massive breakout gap the following Monday. If any of you remember, the move got faded the following day. Then, when TARP finally got announced, the market didn't care and the DOW went on to drop another 3000 points.

    The bailout of Greece felt the same way yesterday, which is why I didn't get suckered into any long positions. Instead, I did nothing. The best indication that this bailout is a failure is the euro's reaction (check FXE). It gave back ALL its gains intraday yesterday!! Today, it's negative again. "Sure-thing" stocks like STD are back to dropping like knives.

    In effect, sovereign risk is alive and well. Yesterday's 1 trillion euro package in fact murders the euro. Hence, euro-denominated securities must be avoided like the plague -- unless one is in lottery-ticket gambling mode. Actually, I would avoid all stocks in general, for the time being, but that's just me.

    In other news, China just reported accelerating inflation and a surge in bank lending in April, which should further embolden the resolve over there to continue upping reserve requirements and reining in lending. Needless to say, copper and oil are movings lower this morning.

    Carry on.

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    • Storage problem for silver? hehe

      I've read a lot of debate between people as to which might be the better investment.

      My personal opinion is that silver can move a lot quicker in the short term if a little money moves into the sector because the silver market is so thin.

      But longer term, there's potential for a lot more silver production at slightly higher prices.

      This is due to the fact that unlike gold, there is quite a bit more silver (in terms of proven reserves) that can be brought into production.

      One caveat....if there should be new applications for silver, that might well change the whole picture.

      And with so much fiat coming, investors might want things that do a better job of concentratng their wealth.

      A bit of silver might be OK for transactional purposes should all hell break loose but in terms of wealth preservation, silver is pretty bulk, no question.

      People that might already own some physical silver are not likely to want any more after having already invested a few grand in it.

      keep in mind, 5 oz of platinum value becomes a very cumbersome load if converted to 100 0z bars of silver.

      (1812*5) /2055 = almost 4.5 100 oz bars.

      = a possible hernia for some people!

    • I have owned gold stocks and the GLD over time. I do not own any physical gold. In spite of all the uses for gold, the price of gold makes it almost useless.
      Inflation fears are the argument for owning gold, while silver actually has multiple uses that that are within the scope of reasonable price. Not to mention practical use as a currency.
      I like silver better than gold and believe the potential for price appreciation for silver is better than gold. Storage being the primary downside for silver.

    • Agree. Though, I also sympathize with Elizabeth about being skeptical of a long-lasting trend. Liz, if it makes you sleep better at night, buy the next pullback, set a stop below the pivot low and swing with the trend.

      I own some physical gold purchased back in 2007, in the 650s, but I plan to buy more via ETF (GLD) in the near future, on the next pullback. I don't see any other asset class making sense for the long-run. As long as developed nations keep running massive debt with insolvent pension systems and high budget deficits, gold will continue to push higher. Since those fiscal imbalances won't be remedied any time soon, gold will continue to work its way higher as an attractive store of value for institutions and central banks.

    • Don't fight the trend.

      A pullback may be in order before the chart goes parabolic.
      $1500 - $2000 is coming.... perhaps higher.

    • Phil I get it....but every fund,trader etc getting in it.A friend of mine who is market maker (out of Vancouver B.C.)told me about 8 years ago to get into it.Now it seems like if not the top it is damn near can also tell when CNBC starts pumping it that it's ready to turn!

    • You're right, gold is cumbersome as a day-to-day medium of exchange and a unit of account.

      Nobody carries gold to buy bread at the corner store. I agree with you on that. But the demand for gold right now is being driven by its function as a store of value. Think about it. If you're a central bank or a major government, you aren't buying gold for transactional purposes. You want exposure to gold because you're getting increasingly concerned about future debasement of all the other currencies you have sitting in your vault (euros, yen, dollars, etc). That's why gold has been going up steadily since 2001.

      Even during the crisis of 2008, gold held firm (that's amazing given that everything got destroyed, including oil) and now gold is well above it's 2008 highs. The demand for gold has been steady and consistent for the past 9 years now. The gold story isn't about mom-and-pops buying Kruggerands on Ebay, but rather government, central bank and institutional demand fueling higher prices -- worried about the outlook for global fiat currency debasement (given the unsustainable government debt in major Western economies and the high budget deficits projected as far as the eye can see).

    • <<In other news, China just reported accelerating inflation and a surge in bank lending in April, which should further embolden the resolve over there to continue upping reserve requirements and reining in lending. Needless to say, copper and oil are movings lower this morning. >>

      Phil, aside from your two comments being a little contradictory, I think you misread China.

      How can accelerating inflation in China be bad for oil and copper?

      If you think the Chinese increase in rates or reserve requirements works the same as here in terms of having effect, I think you be mistaken.

      I'm sure I've debated this issue atleast twice before but I'll repeat it for those that might not have been aroud back then.

      The Chinese inflation that is of concern is WRT RE speculation.

      It has little to do with the level of economic activity.

      And that makes a world of difference.

      Maybe just me, but the way I see it, the increased reserve requiremts for Chinese banks will curtail speculation but have little effect on overall economic activity.

      Note the Chinese imports (raw materials)for the month of April and you might see what I mean.

      Wanna bet against that trend just because speculators have a bit of a cold shower?

      Overall Central planning decisions are not effected by bank reserve requirements or interest rates.

      Do not apply free market thinking to the Chinese model. They have revolving 5 year plans and they pretty much stick to them.


    • Yeah, the China news isn't good. There are concerns being expressed that some European nations won't pony up the cash for the $1 trillion package.

      While you compare this to TARP, however, I am looking more toward the March 29th, 2009 Fed QE announcement as a model, which sparked a huge surge in the markets followed by a step back then another boost. That move also dropped the USD, which didn't have such an adverse effect on the markets. Also unlike when TARP was announced, many European securities (not just banks) have already hit multi-year lows). I think the risk-reward for STD is still to the upside in the medium term.

      We'll see how this plays out soon enough.


      • 1 Reply to aco_brasil0192
      • ACO,

        If 2008 taught us anything, it's that nothing is too oversold that it can't go lower. I had people at my trading desk telling me Citi was a good idea at 30, then 20, then 10. Thankfully, I knew better. Today it's a $5 stock.

        That's why I thought your STD trade was riddled with "lottery" risk. When stocks are dropping like knives, fear grips the market and new lows are being made consistently, purchasing a a falling knife is pure gambling. Look at AKS, for instance, in 2008. The stock went down consistently from $70 to $5.50, throughout the year with hardly a bounce. There's no technical analysis law that says an oversold stock needs to have a "medium term" bounce. If fundamentals are decisively negative and the environment is panicky, oversold conditions can persist for long periods of time.

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