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Sunday November 8, 2009

DrStockPick.com Article!

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Let’s call it what it is; It’s Reagan’s Fault!

The government, both state and federal, is on a feeding frenzy to save the banks, the real reason is that the banks are the feeding ground for our politicians, in fact any office seeker is beholden to the banks for their financial support. As such there will never be any meaningful control over these institutions.

There are now 140 fewer banks then there was last year, and the too big to fail have gotten even larger, and now

(click on pictures for better viewing)

It is indeed an old adage that while goods things are to be preferred over bad things it is possible to get too much of the former. Looking at recent comments from the governor of the Reserve Bank of Australia it is not difficult to imagine how these, albeit old and worn, pearls of wisdom may well have inspired Mr. Stevens in his effort to tiptoe the thigthrope between signalling the intention to raise rates into an expected economic recovery on the one side and trying to prevent the Aussie shoot of on helium into the sun with wings of wax on the other.

(quote Bloomberg)

Australia’s central bank Governor Glenn Stevens signaled a surge in the nation’s currency to near parity with the U.S. dollar has given him scope to slow the pace of future

The Fed’s FOMC announcement came out…

We got exactly what I expected, a kind of wishy-washy, “hedging our bets” statement from the Fed. You have to remember that Bernanke was Greenspan’s right hand man for much of the bubble days of the ‘90s and early ‘00s, so the guy is an expert at walking both sides of the line when it comes to policy and public statements.

For instance, the Fed announced it would keep interest rates between 0% and 0.25% for an “extended period.” No surprise there. As I’ve noted previously, 80%+ of the $200+ trillion in derivatives sitting on US commercial banks’ balance sheets are related to interest rates.

For the Fed to hint at raising rates (let alone raise them) would kick off a systemic implosion that would wipe out the very guys the Fed has been bailing out. Suffice to say the Fed won’t be raising interest rates …

Stanford Professor John Taylor has suggested that monetary policy could be summarized in terms of a simple rule, lowering interest rates when output is too low and raising them when inflation is too high. A number of academic papers have investigated this rule from the perspective of describing what the Federal Reserve has historically done. In a new paper co-authored with Federal Reserve economist Seth Pruitt and Office of Immigration Statistics economist Scott Borger, I take a look at what monetary policy rule the market perceived the Fed to be following over different historical periods.

Our basic idea is that, back in the days before we ran into the zero lower bound on interest rates, if there was a major surprise in a macroeconomic news release, you would see a big change in fed funds futures prices. For example, when the BLS announced

Currencies trade in a tight range again…U.S. Retail Sales are a clunker! RBA’s Stevens is upbeat! Thoughts on Brazil…And Now… Today’s Pfennig!

Good day… And a Happy Friday to one and all! The end of the week… It’s been a tough week for yours truly, as I’ve hobble around in pain all week. But, as I recall, I promised 2 years ago that I would not complain about these things in the future… So! I carry on!

Well… Front and center this morning… The currencies are trading near levels they were when I signed off yesterday morning. They did have a brief rally, after the U.S. Retail Sales data showed some real rot

A government report that suggested the economy shrank at a slower pace than feared failed to push stocks higher on a lackluster Friday but indexes managed to end the month on a solid footing, spurred by hopes that the recession is losing its force.  The big July saw the Dow Jones industrial average surging 725 points or 8.6% - its best July since 1989, and the broader S&P 500 index gaining 7.4% for its best July run since 1988.  The S&P500 has now recorded its most remarkable five-month performance since 1938, holding 46% above its 12-year low set in early March.

This morning’s US stock futures indicate a sharply higher opening, helped by positive signs emanating from overseas markets.  Today, Chinese stocks hit a 14-month high after data showed manufacturing activity is expanding in the country.  The Shanghai Composite Index rose 50.53 points, or 1.5%, to close at 3,462.59

From the first paragraph of my Saturday commentary…”I don’t know what it is about that [one hour and change] stretch of time between the Sydney close and the London open…but if there is going to be a down day…it starts right there a large percentage of the time.” Any questions? Actually, both gold and silver got sold off the moment that the New York bullion banks opened for business 6:00 p.m. on Sunday night…which is very early Monday morning in Far East trading. Shortly before 3:00 p.m. in Hong Kong, gold had almost made it back to unchanged…and silver was actually up a couple of cents when the hammer fell. The bottom for gold came very shortly after the London a.m. gold fix at 5:30 New York time…and in silver, shortly after the Comex open. The ‘rally’ in the US dollar that started at the same time as the precious

Gold price action on Monday looked similar to Friday’s. The bottom for gold in the Far East came shortly after 3:00 p.m. in Hong Kong…rose until shortly after London opened, declined a couple of bucks…but once the London a.m. gold fix was in [10:30 a.m. in London...5:30 a.m. in New York], gold rose to its high of the day shortly after 11:00 a.m. This high [once again over $940] lasted until 9:00 a.m. in New York, shortly after the Comex opened…then it got taken down eight bucks to its low of the day at 10:00 a.m. in New York…which just happens to be the London p.m. fix…3:00 p.m. over there.

From that point it rose right into the Comex close…and was taken down and closed below $940 once again in the electronic market.

Silver’s chart pattern was virtually identical to gold’s.

By Cees Bruggemans

With the SARB going on hold last week, the prime interest rate remaining at 11%, the question is what next.

Another cut of 0.5% in August, prime falling to 10.5%?

Or have we reached a bottom, prime remaining at 11% through next year, with the speculation shifting as to when the first tightening move will occur (2010-2012?).

My sense is that we have reached an abrupt bottom at 11%.

This isn’t warranted by the current CPI inflation forecast and the recessionary condition of the economy.

Its reasons lie elsewhere, in the risks to the inflation forecast (which may change but will probably not improve) and especially the global picture (where the strength of industrial recovery is probably going to surprise many).

In terms of a simple Taylor Rule, the bedrock assumption is for our prime interest rate to incorporate a stable real premium longer term (in

More range trading…  Eurozone doesn’t need more stimulus…  A$’s outperform on rate outlook…  A double whammy for the dollar… And Now… Today’s Pfennig!

Good day… And a Happy Friday to one and all! The end of another week… I was out on Monday, and it still seems to have been another long week! UGH! Oh well… It’s Friday, and this weekend is Father’s Day… So, we’ve got that going for us, eh?

More range trading in the currencies yesterday, with the euro leading the currencies higher for most of the day, only to see their gains slip, sliding away by the late afternoon. In the overnight markets, the currencies, once again, have moved higher, but nothing to get all lathered up about…

This morning, the euro got a boost when, in a draft statement from European Union leaders, it was reported that they believe they are seeing the first signs of a “sustainable economic recovery”, and that