Bearer Bond Media Note
I am not going to let this story die off, so i will try and find at least one mention of it daily.
Clusterstock's Joe Weisenthal was on the Glenn Beck show and did a small discussion. See video here.
Inflation/Deflation - Another View
An interesting take over at Accrued Interest on the -flation debate:
FED: Deflation? Over My Dead Body
But will we see CPI print below zero? Only if the Fed fails. In other words, sustained deflation remains a remote possibility. But sustained Fed interference in the markets in attempt to avert deflation is a strong probability.
So the bet should be not on deflation outright, but on the fallout from attempts to fight it. Weaker dollar. Higher commodities. Low short-term rates (including buying 2-year bonds as opposed to holding cash). Flat yield curve. Lower mortgage rates (at least from here).
That's is how I'm playing my deflation view.
I left a comment chiming in that would it be possible for deflation to take hold AND have a weaker dollar? An interesting thought experiment. The author seems to be closely aligned with my theorem that in the course of peeing their pants about deflation, the FED will cause all kinds of other damage trying to stop it. Leading to inflation! Eventually.
Dick Bove Sighting
I have spilled pixels on Dick Bove many times over the past 2 years, so I thought I might give the guy some more attention:
Dick Bove: Bank of America Faces “Horrific” Loan Losses (BAC)
"In the second quarter, (Bank of America's) position as the largest lender in multiple sectors of the American financial system will haunt the company as its losses expand," Bove said.
Nonetheless, Bove rates the company a buy, and raised his price target to $19 (from $14). He expects the price-earnings multiple on the stock to rise, and thinks confidence in the bank and its management are improving. This reminds us, of course, of our thesis from this weekend: the government’s guarantee against bank failure is driving up stock prices.
As an investor I try very hard to isolate companies who will "be haunted by expanding losses" and then load up on their stocks. NOT!
One Thing at a Time
Markets took a hit across the board today, with losses reaching their worst sizes since April. There was a ton of noise out there today, so I want to touch upon some things I was looking at.
It seems almost like the same players that are responsible for the two month gunning of futures right before the market close are unable to do two things at once. Today mission number 1 was to get a dollar rally. Helped by the Russian communication (so soon after the 135 Billion in bearer bonds was reported) that the US dollar was King Chit of Turd Mountain (KSTM) spurred the buck higher on the day. Of course a higher dollar is bad for stocks, oil, metals, well everything so everything fell.
As far as specifics, I will likely be stopped out of my SPY position taken a while back if there is further weakness. I have removed stops of my buys of SLV, GLD, and PAAS even though they are looking a bit weak here. Yes, I am a metals addict.
I should know better, and Tim Knight lowers the boom with Broken GLD:
"My precious metals shorts have done well for me; GLD now has broken a major trendline. Precious metals could be in serious trouble now."
Tim is a sharp player and I respect his call. Still, this is the 17th time in the past year that GLD and SLV have broken down on their way to zero and yet they still hang tough. We will see.
It seems the relationship between the dollar and stocks/commodities/metals has become super sensitive. The dollar only moved up from mid 79's to low 81's on the index so the aggressive move on the other end seems a bit overdone.
This relationship is a major contributor to my view that the dollar will have to weaken for any stock rally to continue. There will be one day wonders where the concentrated efforts to push it up occur, but the general market puking reaction will snuff that out.
It is a wild interconnected mess we have here. Balancing the buck and foreign interest in it with the need for a recovering market is a delicate dance. The folks in charge of the music think they can do this without a serious dislocation in one or more of the parts. Who has such a high opinion of their own abilities? From 10 years ago:
I submit the Committee to Save the World. Rubin and Summers are once again at the helm, and while Greenspan has since sailed on, we now have Ben Bernanke in the same position as Greenspan in this picture: The public face while the two behind him hold knives to his back.
I am sure this will all work out well.
Have a good night.