some things i feel strongly aboutby chivasontherocks on June 12th, 2008 at 7:28 am |
1- u.s. equities are at or very near a bottom
2- crude will break par
3- dollar index will go to at least 80
4- gold will break 800
things i did yesterday
1- cover my fed short
2- bought fdx and bni
3- after selling half of my position in tso in the high 28, bought it back yesterday
i continue to believe that the transports and q’s will lead and that the refiners will see 50-100 gains with some of them being taken out.
p.s. Jake, congrats on bud
1. no way
2. no way
3. no way
4. maybe but it would be the buy of the millenium
things u did jesterday
June 12th, 2008 at 8:34 am1. understandable but its going lower
2. you crazy unless you’ll flip it
3. could work as a trade
lol.
a bottle of chivas against one of your tequila.
Jake, is that you?
June 12th, 2008 at 8:50 amI hope you are right Chivas…at least long enough for me to flip some ultra longs… bbbbwwwwwwwhhhhhhhahahaha (evil laugh)…
June 12th, 2008 at 8:50 amWood.
lmfao
June 12th, 2008 at 8:51 amholy shit, your balls might be bigger than mine….
June 12th, 2008 at 9:13 ambut my brain is larger, of course.
probably your balls too. lol.
June 12th, 2008 at 9:16 amGO TSO
June 12th, 2008 at 9:22 amChivas,
No, that wasn’t me, but I can see the sentiment.
My take is equities will not be “at the bottom” until the credit crisis is figured out. That’s 50 to 100 dead banks from now, minimum, imho.
You may be correct about us being near a “near-term” low, however, as I do think we’ll get a launch to the election and then kaboom again.
I don’t see the dollar index breaking 80 without B-man raising rates — not with India and the ECB raising. Same goes for your gold prediction. Bernake is still running the presses. Jawboning is not going to cut it.
If you’re going to buy a transport, buy UPS before you buy FDX, btw.
June 12th, 2008 at 9:42 amMy dear Jake,
imho, it matters not what bernanke does now. rate differentials have been moving in favor of the dollar for the past 3 months. just recently the german yield curve inverted, for the first time in 8 yrs. it suggest ecb will not raise anytime soon if at all, ragardless of their mandate.
remember 3 months ago our 10 yr was 3.4 today 4.21.
our 3 month bill was .60 today 1.90
our 2yr was 1.7 today 2.90+
June 12th, 2008 at 1:08 pmHope you’re right, Chivas. It’s much more fun to be bullish and have the country experiencing widespread prosperity than it is to be in this economic malaise.
June 12th, 2008 at 3:12 pmPud,
June 12th, 2008 at 3:33 pmWhat is, is. You make money where and when you can, and then recycle it back into the economy. That’s prosperity and also your patriotic duty.
chivas,
Of course it matters what Bernanke does…critically in point of fact.
ECB are talking [at this stage] about a 1 off 25 basis point raise.
Inflation makes US equities [relatively] cheap in foreign currency, hence, the InBev bid for [cheap] BUD assets…thus we might see further overseas bids for US assets [including Real Estate]
jog on
June 12th, 2008 at 4:04 pmduc
Duc,
with all do respect. the fed most of the time ends up following the market. this last time around the market led the fed to the downside. the market was begging the fed to cut and they did. now the market and futures market are pricing in a fed that is going to raise rates. imho, they will take their sweet time. i agree with your last paragraph because imo the anticipation of a stronger dollar makes dollar denominated assets more attractive.
June 12th, 2008 at 4:17 pmthanks for your input.
chivas,
Twixt the Market & The Fed there exists a certain correlation.
Correlation does not however define CAUSATIVE.
The reason for the Fed cuts was the requirement to create a rising Yield curve to combat the convexity within MBS which was decimating Bank Balance Sheets.
This via lowering rates and other esoteric interventions has stabilised the major banks/brokers
Inflation will now become to key focus. If so, you will see that the bottom is in the US$
Rate rises are next, which will add to US$ values.
So far, Bernanke through nothing but jawboning, has arrested the US$ decline.
In essence, that rather refutes that the Fed is powerless, nothing matters more than what the Fed policy will be going into the future.
Of course, that can be derailed should there be another systemic risk hiding as a Black Swan, yet to come to the fore.
jog on
June 12th, 2008 at 4:30 pmduc
Duc,
please, do not misunderstand me. the fed, of course is the ultimate authority. one of the things that increased my bullishness on the dollar was the fact that bernanke, going against the understanding between the fed and treasury spoke strongly about the dollar. that was followed by paulson for the first time ever, speaking about the possibility of intervention. having said all of that, if you examine the history of the last 30 yrs, the market movements have precceded fed action most of the time. again, thanks for your input.
June 12th, 2008 at 4:42 pmchivas,
You say examine the history of the last 30yrs.
I have and do.
Do you have a specific example, or set of examples that you feel illustrate your point?
jog on
June 12th, 2008 at 4:48 pmduc
Duc,
just this last time around. the 3,6 months bills along with the 2 yr was substantially below the fed funds rate until the fed caught up. that’s the market leading the fed. now, is just the opposite, and imo the fed will take its time catching up.
June 12th, 2008 at 4:57 pmchivas,
When you say “This last time around” which dates are you referring to?
Then, I’ll have a look at this example specifically, and then come back to you on it.
Also, my breakfast is cooking and I’m a tad peckish.
jog on
June 12th, 2008 at 5:19 pmduc
Duc,
just look at any period of time you want when the fed is either raising or lowering rates, and then look at fed funds vs 3,6 months bills and 2 yr rates. you will find that the market as defined by these instruments leads fed action most of the time. if you recall, one of the debates that we had in the past, i said we had a yield curve that was positive based on 2yr vs 10 yr yield, and you said that was not correct because fed funds were higher than 10yr yields. that was an example of the market leading the fed.
btw.
i will be in your country come october.
June 12th, 2008 at 5:33 pmDuc,
i’m out of here. see you later. feel free to e-mail me if you want. jfernandez5357@bellsouth.net
June 12th, 2008 at 5:37 pmchivas,
I see we are talking in generalizations, which is never a good thing.
In June 1970 the Federal Reserve agreed [with the banks] to abandon their [Fed] control of interest rates on Certificates of deposit in excess of $100K
This removed the ability of the Fed to constrict, or cut off the money spigot. Thus the only tool left was [is] the short end rates.
Second, in 1978 the Humphrey-Hawkins Act was passed, making the Federal Reserve responsible for interest rate policy as it impacts unemployment as well as inflation.
The two responsibilities are mutually exclusive. High interest rates slow an economy and increase unemployment, but reduce inflation. Or low rates, the opposite, increase employment, increase inflation.
Thus the modus of the Fed by necessity, has morphed into a psychological game, almost game theory, with the financial markets.
The ECB has no such responsibility to employment, only inflation. Thus, the ECB may well raise rates even though it may harm employment.
Incidentally, an inverted yield curve that has fluctuated to inversion is not as serious as a maintained inversion.
Interesting as you mention the German inversion, as they are one of the few countries that had no housing bubble, prices remained cheap. The ECB displays many of the characteristics of the old Bundesbank.
In regards to your example, let’s say that instead of lowering rates, Bernanke had again raised rates.
So we have this type of situation;
…………….CURRENT 1 MONTH 3 MONTH 6 Month
Federal Rate…. 2.00… 2.00… 3.00… 4.25
1-Month Libor… 2.47… 2.53… 2.86… 5.10
3-Month Libor… 2.78… 2.68… 2.85… 5.06
10-Year AAA….. 5.89… 5.48… 5.31… 5.58
So Bernanke raises;
Fed Rate………3.5%
1-Month LIBOR….2.86%
3-Month LIBOR….2.85%
10-Year AAA……5.31%
There would be a carry trade available.
I sell LIBOR and buy FFR until, the rates reach equilibrium, which may result in a lower rate than the Fed wants, or feels that is required, thus, the Fed then raises again. Eventually, the Fed will have it’s way.
The second way, is to telegraph the intention of the FED and get markets to move in anticipation of FED policy. This is what Bernanke is trying to do currently.
He also did it, during the lowering cycle.
The problem in the Credit markets wasn’t one of Interest rates, it was one of, the Banks WOULDN”T LEND in the LIBOR market, as they were afraid that they would either need the capital themselves and that they would not be able to access it, or that it wouldn’t be paid back.
Thus, we had the instigation of all the new Fed lending arrangements against suitable collateral, which eventually succeeded in breaking the deadlock.
jog on
June 12th, 2008 at 11:30 pmduc
If TSO shows a double bottom here I’ll jump back in it. Problem is every time it has done this, it wound up making a new low.
June 13th, 2008 at 8:04 am