More on the Multi-Asset Class ETF Portfolio

September 24th, 2010

Yesterday’s post, Diversification, Momentum and Sidestepping the 2008 Panic, brought such a positive response that I thought a brief follow-up is in order.

In the chart below, courtesy of ETFreplay.com, I show how the Multi-Asset Class ETF Portfolio I referred to yesterday performed on a month to month basis, this time using the ETFreplay’s Portfolio Moving Average timeline tool. The chart is really a table which shows all of the ETFs and the results of the moving average rule which determined whether to be long or in cash for each month of the period covered. The far right portion of that graphic also shows where the each of the individual ETFs currently stands relative to their selected (in this case it was six months) moving average.

Commodities, ETF, Uncategorized

When Gold Goes Up

September 24th, 2010

“Gold is saying something,” writes Bloomberg columnist Mark Gilbert.

What’s it saying? Nobody knows. Well, at least nobody who works at The Daily Reckoning. We listen. We hear. But we still don’t know what the hell gold is talking about. The yellow metal is speaking in riddles.

Yesterday, gold spoke again. It rose $4 to a new record high of $1,296. Tomorrow, it will probably hit yet another record – possibly over $1,300.

In the conventional wisdom, gold is telling us to watch out. Inflation is coming. Either the regular kind…the kind that comes with “growth”…or the kind that comes with the “hyper” modifier. Almost everyone likes the regular kind. Almost no one likes the hyper kind.

But being the contrary coots that we are, we’re inclined to think that there will be many a slip between the cup of $1,300 gold and the puckered lips of gently rising inflation levels.

Watch out, dear reader, watch out.

Not that we’re dissing gold or sassing the goldbugs. Not at all. We think it’s going to $1,500…and then to $3,000. But next week?

Don’t know. We have to keep listening…trying to interpret the whispers.

There’s something all together too obvious and too easy about the gold market now. It just goes up. Year after year. Maybe it’s a trap.

In 2000, there was a crash in dot.coms. The whole magic of the tech bubble suddenly disappeared. And guess what? Gold went up.

In 2001, the War on Terror began. And guess what? Gold went up again.

And again in 2002. And 2003. And 2004.

By 2005, the world economy was in the throes of a massive financial bubble. Everything was going up. Gold went up too.

In 2006, the US had a major housing bubble on its hands. Gold went up.

In 2007, the housing bubble started to lose air. Gold went up.

In 2008, Wall Street stared into the abyss. Lehman Bros. went broke. The feds took over housing finance, auto-making, insurance, commercial lending…and gold went up.

In 2009, the feds went all out to try to engineer a recovery. The Fed ballooned its balance sheet by $1.2 trillion. The federal budget went into deficit by nearly one and a half trillion. Still, gold went up.

And what’s this? The recession officially ended more than a year ago. Housing and unemployment are still limping. De-leveraging is still underway (David Rosenberg calls it a “depression”)…and go figure. Gold is still going up.

Is there anything that can stop gold from going up?

We don’t know. But many smart people are coming to the conclusion that they can’t lose with gold. If the economy recovers…gold is a cinch to go up along with inflation. If the economy falters…gold will go up when the Fed comes to the rescue with more printing press money.

And then, there are the Chinese. God knows they like gold. And they don’t have much of it. If they’re behind this gold market it could last for another 20 years.

So gold is a “can’t lose” investment.

We like gold. But we don’t like “can’t lose” investments. What to do?

Bill Bonner
for The Daily Reckoning

When Gold Goes Up originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
When Gold Goes Up




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

When Gold Goes Up

September 24th, 2010

“Gold is saying something,” writes Bloomberg columnist Mark Gilbert.

What’s it saying? Nobody knows. Well, at least nobody who works at The Daily Reckoning. We listen. We hear. But we still don’t know what the hell gold is talking about. The yellow metal is speaking in riddles.

Yesterday, gold spoke again. It rose $4 to a new record high of $1,296. Tomorrow, it will probably hit yet another record – possibly over $1,300.

In the conventional wisdom, gold is telling us to watch out. Inflation is coming. Either the regular kind…the kind that comes with “growth”…or the kind that comes with the “hyper” modifier. Almost everyone likes the regular kind. Almost no one likes the hyper kind.

But being the contrary coots that we are, we’re inclined to think that there will be many a slip between the cup of $1,300 gold and the puckered lips of gently rising inflation levels.

Watch out, dear reader, watch out.

Not that we’re dissing gold or sassing the goldbugs. Not at all. We think it’s going to $1,500…and then to $3,000. But next week?

Don’t know. We have to keep listening…trying to interpret the whispers.

There’s something all together too obvious and too easy about the gold market now. It just goes up. Year after year. Maybe it’s a trap.

In 2000, there was a crash in dot.coms. The whole magic of the tech bubble suddenly disappeared. And guess what? Gold went up.

In 2001, the War on Terror began. And guess what? Gold went up again.

And again in 2002. And 2003. And 2004.

By 2005, the world economy was in the throes of a massive financial bubble. Everything was going up. Gold went up too.

In 2006, the US had a major housing bubble on its hands. Gold went up.

In 2007, the housing bubble started to lose air. Gold went up.

In 2008, Wall Street stared into the abyss. Lehman Bros. went broke. The feds took over housing finance, auto-making, insurance, commercial lending…and gold went up.

In 2009, the feds went all out to try to engineer a recovery. The Fed ballooned its balance sheet by $1.2 trillion. The federal budget went into deficit by nearly one and a half trillion. Still, gold went up.

And what’s this? The recession officially ended more than a year ago. Housing and unemployment are still limping. De-leveraging is still underway (David Rosenberg calls it a “depression”)…and go figure. Gold is still going up.

Is there anything that can stop gold from going up?

We don’t know. But many smart people are coming to the conclusion that they can’t lose with gold. If the economy recovers…gold is a cinch to go up along with inflation. If the economy falters…gold will go up when the Fed comes to the rescue with more printing press money.

And then, there are the Chinese. God knows they like gold. And they don’t have much of it. If they’re behind this gold market it could last for another 20 years.

So gold is a “can’t lose” investment.

We like gold. But we don’t like “can’t lose” investments. What to do?

Bill Bonner
for The Daily Reckoning

When Gold Goes Up originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
When Gold Goes Up




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

The Legend of Alan GreedScam

September 24th, 2010

Mortgage Rates has an infographic featuring the tale of Alan Greenspan’s twin-like in appearance alter ego, Alan GreedScam, including how he helped orchestrate decades of malinvestment in the US.

Of course, it’s actually one in the same person, but when you look at Alan Greenspan’s early writing — strongly in support of gold-backed currency — you must wonder where he went wrong. In his 1966 piece, entitled Gold and Economic Freedom, he wrote:

“This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

The graphic below shows just how far he strayed from those beliefs. It can be seen in its full high-resolution glory exactly where it came to our attention, in a recent post about Alan GreedScam on The Big Picture blog.

The full infographic follows…

The Legend of Alan GreedScam originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
The Legend of Alan GreedScam




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

The Legend of Alan GreedScam

September 24th, 2010

Mortgage Rates has an infographic featuring the tale of Alan Greenspan’s twin-like in appearance alter ego, Alan GreedScam, including how he helped orchestrate decades of malinvestment in the US.

Of course, it’s actually one in the same person, but when you look at Alan Greenspan’s early writing — strongly in support of gold-backed currency — you must wonder where he went wrong. In his 1966 piece, entitled Gold and Economic Freedom, he wrote:

“This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

The graphic below shows just how far he strayed from those beliefs. It can be seen in its full high-resolution glory exactly where it came to our attention, in a recent post about Alan GreedScam on The Big Picture blog.

The full infographic follows…

The Legend of Alan GreedScam originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
The Legend of Alan GreedScam




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

The Hartford Enters Active ETF Arena

September 24th, 2010

The Hartford Financial Services Group, Connecticut based company with over $380 billion in assets, has filed with the SEC for exemptive relief to launch actively-managed ETFs through a newly formed “The Hartford Active Exchange-Traded Fund Trust”. The proposed funds will be sub-advised by Hartford Investment Financial Services, which currently has $45 billion in assets under management.

The Hartford is seeking relief for actively-managed ETFs that may also invest in other ETFs, thereby creating a fund-of-funds structure. While the relief has been sought for funds that may invest in equities or fixed-income securities, both in the US and markets, the initial fund will invest primarily in US dollar and non-US dollar denominated investment grade debt. The securities may be issues from both developed and emerging markets and of any maturity. The filing though clearly points out that the proposed funds will not invest in any derivatives such as swaps, options and futures. This last caveat has been a common feature of many recent filings for Active ETFs that are attempting to avoid additional scrutiny resulting from the SEC’s ongoing investigation into derivative usage in ETFs.

The Hartford currently has an array of mutual fund across various asset classes that it offers to investors and in July announced fee reductions on 36 of its mutual funds, in an attempt to make them more competitive within their Morningstar categories. The move to enter Active ETFs is likely part of a larger push to address advisor demands for lower expenses and fee transparency.

There are now numerous well-known mutual fund shops, such as Legg Mason, Eaton Vance, T. Rowe Price and John C. Hancock that have filings to launch actively-managed ETFs which are backlogged with the SEC. However, very few of those proposed Active ETFs have made it out the other end and launched on the market, giving the impression that the SEC is now the biggest hurdle in getting these products out to market. The SEC launched its investigation back in March 2010 and since then new launches of Active ETFs have slowed down to a trickle, even as the filings continue to pile up.

ETF, Mutual Fund, OPTIONS

The Hartford Enters Active ETF Arena

September 24th, 2010

The Hartford Financial Services Group, Connecticut based company with over $380 billion in assets, has filed with the SEC for exemptive relief to launch actively-managed ETFs through a newly formed “The Hartford Active Exchange-Traded Fund Trust”. The proposed funds will be sub-advised by Hartford Investment Financial Services, which currently has $45 billion in assets under management.

The Hartford is seeking relief for actively-managed ETFs that may also invest in other ETFs, thereby creating a fund-of-funds structure. While the relief has been sought for funds that may invest in equities or fixed-income securities, both in the US and markets, the initial fund will invest primarily in US dollar and non-US dollar denominated investment grade debt. The securities may be issues from both developed and emerging markets and of any maturity. The filing though clearly points out that the proposed funds will not invest in any derivatives such as swaps, options and futures. This last caveat has been a common feature of many recent filings for Active ETFs that are attempting to avoid additional scrutiny resulting from the SEC’s ongoing investigation into derivative usage in ETFs.

The Hartford currently has an array of mutual fund across various asset classes that it offers to investors and in July announced fee reductions on 36 of its mutual funds, in an attempt to make them more competitive within their Morningstar categories. The move to enter Active ETFs is likely part of a larger push to address advisor demands for lower expenses and fee transparency.

There are now numerous well-known mutual fund shops, such as Legg Mason, Eaton Vance, T. Rowe Price and John C. Hancock that have filings to launch actively-managed ETFs which are backlogged with the SEC. However, very few of those proposed Active ETFs have made it out the other end and launched on the market, giving the impression that the SEC is now the biggest hurdle in getting these products out to market. The SEC launched its investigation back in March 2010 and since then new launches of Active ETFs have slowed down to a trickle, even as the filings continue to pile up.

ETF, Mutual Fund, OPTIONS

Silver Nears 30-Year High

September 24th, 2010

Well… The one-day of profit-taking and soft data selling in the currencies is water under the bridge, and the currencies are back to kicking sand in the face of the dollar. And gold? The shiny metal is knocking on the door to $1,300, and silver is near a 30-year high! So… In my book, this is a Fantastico Friday!

Yes… The one-day of reprieve for the dollar is in the books, and it’s time to get back to the task at hand, you know, the one the US government wants, and the one the US Treasury wants, and the Cartel for that matter wants it too… And that is a weaker dollar, so that they can achieve two goals…

1. Give the US Treasuries they need to sell and continue to sell again and again to finance the deficit spending, a “discount price”… Which is what a cheaper dollar will do. And…

2. Allow the US government to repay debts with cheaper dollars…

Let’s not ever forget those two goals… When it gets dark and gloomy for the currencies, like last winter, with the Eurozone GIIPS, and it looks like the dollar will enter a multi-year strong trend, you have to pull those two goals that you’ve written down, out of your back pocket to reassure yourself that diversifying is the right thing to do!

This morning in Germany, the euro (EUR) got a boost back over 1.34, when German Business Confidence, as measured by the think tank IFO, showed a nice increase, moving the index to a three-year high! WOW! This is not some fly-by-night operation either, folks! IFO surveys 7,000 business executives… For those of you keeping score at home, the IFO index is now 113.07…

I see where some Fed Heads are taking exception to the markets’ reaction to the FOMC statement on Tuesday… The Fed Heads claim that the markets have overreacted. Yeah, and we all just fell off the turnip truck! NOT! Oh well… This will put a smile on your face… That is, if you laugh with me in my corner… Get this… Big Ben Bernanke is going to give a speech today titled: “Fixing Economics: Lessons from the Crisis”.

I’m going to leave that one right there, as there are so many smart aleck remarks that are shooting through my brain right now!

Well… Our President met with China and Japan yesterday in attempts to get them to allow their currencies to gain versus the dollar (see, I told you the government wants a cheaper dollar!) We saw the Chinese leader standing next to the President at the end of their meeting and they were taking questions… The Chinese leader just stood there with this smile on his face, that said, “I don’t care what you want, we’re not going to allow the renminbi to gain 20% like you have demanded we do”… Smile… HA!

I just don’t see where the US gets off telling other countries that buy our debt, and keep our economy from collapsing, and the dollar from defaulting, what to do with their currency… I’ll tell you right now, that the US government, doesn’t hold true the idea that each country has an obligation to its people/citizens to provide price stability, and no to debase their currency! Other countries do… And that’s where the rubber meets the road folks…

Having said that… It is thought that the Bank of Japan (BOJ) came back into the markets to sell yen (JPY) again last night, as yen fell from 84.50 to 85.40 in a manner of minutes, although unlike last time, the Ministry of Finance (MOF) did not confirm that they had issued instructions to the BOJ to intervene… But, that’s all it could have been… It looks like intervention, walks like intervention, and smells like intervention… It was intervention!

But guess what? The markets volleyed back the BOJ’s serve, and pushed yen back to a level that was even stronger than the 84.50 it started out at! The markets are taking the fight to the BOJ and MOF… Good Show!

I just saw Marc Faber on the Bloomberg TV channel, talking about Asia… I see where he agrees with me that the Asian currencies (including the Pan Asian currencies) are the best-positioned currencies to rally and gain versus the dollar. Of course, I would have gone further to say the commodity currencies wouldn’t be far behind… But, you know me… I’ve got to get my two-cents in whenever I can!

I have been telling you about the fight going on in the markets over the Brazilian real (BRL)… The Brazilian Central Bank (BCB) has been rumored to be spending $1 billion per day on buying dollars and selling real, in an attempt to keep the real from getting too strong, and the markets are fighting back with their own treasure chest of money… Last week, there were 284,967 more bets on the real rising than falling; that’s the most since June of 2007. Basically, each contract is worth $50,000, so doing the calculation, and using my new math skills, I come to more than $14 billion!

As I’ve always told you, central bank intervention will not work in the long run… You see, in the real’s case the rise is fundamental… Their economy is strong, their exports are strong, inflation is heating up, and in need of higher interest rates, which already are present in Brazil… Those things speak of a stronger real… In the long run, after the government gives up, or runs out of money…

Not that this has anything to do with the Brazil story, but running out of money reminds me of a quote that I’ve used at my presentations before, and always gets a rise out of the audience, and that is what Margaret Thatcher said about socialism… “The problem with Socialism is that eventually you run out of other people’s money.”

I guess that would be a good one for everyone to remember here in the US…

OK… Back to Brazil… The Brazilian government has made claims about “not losing” this battle for the real… I don’t believe the Brazilian government has had a chat with reality lately… It would behoove them to do so, before they go and throw billions more down the drain…

OH! And looky here! I see where Petroleo Brasileiro, Brazil’s state-controlled oil company, will be able to develop mammoth offshore oil reserves after raising $70 billion in the largest share offering worldwide… This just means more demand for reals, folks…

But… Like I always do, when talking about Brazil… It is to remind you that Brazil is an emerging market, and strange things can happen in emerging markets. So be careful to use only the “speculation money” of your portfolio here…

OK… Enough of that! How about what’s going on here in the US besides the President wasting time urging the Chinese to allow a 20% appreciation in their currency? Well… Former Fed Chairman, Paul Volcker, is telling people to “not worry about deflation here in the US.”  Hmmm… Sounds like old Paul must have become a Pfennig Reader! I’ve been saying that for some time now, and even showed you some food price items that had been rising…

Well, my friend, and colleague over at the Sovereign Society, Eric Roseman, pointed out to me the other day that there are some indexes that track agriculture are really beginning to move higher… For instance, the Dow Jones- UBS Agriculture index is up 27.7% this year… Hmmm… Didn’t I tell you once that the Fed/Cartel will take their eye off the inflation ball, concerning themselves with deflation, and before they know it, inflation will be soaring, and they’ll rush to hike rates, but they will be so far behind the inflation 8-ball… Well… It’s beginning to look like that forecast will come to fruition, eh?

Recall a couple of weeks ago, I told you that there were reports that back customers with time deposits (CD) were allowing them to mature, and moving the dollars into checking accounts, so they would have liquidity? Well… Time-deposit balances declined from $2,365 billion on January 1, 2010 to $2,165 billion on June 30, 2010, as $200 billion in maturing CDs were not rolled over. Out of the $200 billion decrease in CD balances, consumers used $29 billion, or 15%, to pay down credit card and other revolving debt, according to the guys over at Market Rates Insight…

I’ll tell you one thing… Those people need to be opening EverBank checking accounts, because the EverBank checking account, besides being called the “Best Checking Account in the country” by Kiplinger’s, also pays interest on the balance, that beats the national average by a country mile!

OK… For those of you who don’t like it when I advertise something in the letter, sorry… For those of you who don’t already have an EverBank Checking Account, what are you waiting for?

Well… Of course, basically, I would be telling those people that they need to shift some of their dollars to currencies and precious metals… But, that’s my message wherever I go, people wanna know, and I tell them… Diversify a portion of your portfolio out of dollars and into currencies and metals…

The US data cupboard today has August Durable Goods, and New Home Sales… Durable Goods data has been quite volatile in recent months, and I expect August to be no different. New Home Sales are expected to rise… I’ll bet a dollar versus a Krispy Kreme that the only way this happens is if the Home prices fall…

Then there was this… From The Washington Post

Senate Democrats said Thursday that they had abandoned plans for a pre-election showdown with Republicans over taxes, postponing any vote on extending Bush administration tax cuts until after the November midterms…

You don’t think the decision to delay this vote on taxes has any thing to do with the mid-term elections, do you? HA!

To recap… The one-day of profit taking is over, and the currencies are back on the rally tracks this morning. The euro is back over 1.34, and gold is knocking at the door to $1,300, with silver near a 30-year high! It looks like Japan intervened last night, temporarily taking the yen weaker, only to see the markets reverse the trade, and push yen stronger! The President met with China and Japan yesterday… I doubt anything will come of it, and it will turn out to have been a waste of time…

Chuck Butler
for The Daily Reckoning

Silver Nears 30-Year High originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Silver Nears 30-Year High




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Silver Nears 30-Year High

September 24th, 2010

Well… The one-day of profit-taking and soft data selling in the currencies is water under the bridge, and the currencies are back to kicking sand in the face of the dollar. And gold? The shiny metal is knocking on the door to $1,300, and silver is near a 30-year high! So… In my book, this is a Fantastico Friday!

Yes… The one-day of reprieve for the dollar is in the books, and it’s time to get back to the task at hand, you know, the one the US government wants, and the one the US Treasury wants, and the Cartel for that matter wants it too… And that is a weaker dollar, so that they can achieve two goals…

1. Give the US Treasuries they need to sell and continue to sell again and again to finance the deficit spending, a “discount price”… Which is what a cheaper dollar will do. And…

2. Allow the US government to repay debts with cheaper dollars…

Let’s not ever forget those two goals… When it gets dark and gloomy for the currencies, like last winter, with the Eurozone GIIPS, and it looks like the dollar will enter a multi-year strong trend, you have to pull those two goals that you’ve written down, out of your back pocket to reassure yourself that diversifying is the right thing to do!

This morning in Germany, the euro (EUR) got a boost back over 1.34, when German Business Confidence, as measured by the think tank IFO, showed a nice increase, moving the index to a three-year high! WOW! This is not some fly-by-night operation either, folks! IFO surveys 7,000 business executives… For those of you keeping score at home, the IFO index is now 113.07…

I see where some Fed Heads are taking exception to the markets’ reaction to the FOMC statement on Tuesday… The Fed Heads claim that the markets have overreacted. Yeah, and we all just fell off the turnip truck! NOT! Oh well… This will put a smile on your face… That is, if you laugh with me in my corner… Get this… Big Ben Bernanke is going to give a speech today titled: “Fixing Economics: Lessons from the Crisis”.

I’m going to leave that one right there, as there are so many smart aleck remarks that are shooting through my brain right now!

Well… Our President met with China and Japan yesterday in attempts to get them to allow their currencies to gain versus the dollar (see, I told you the government wants a cheaper dollar!) We saw the Chinese leader standing next to the President at the end of their meeting and they were taking questions… The Chinese leader just stood there with this smile on his face, that said, “I don’t care what you want, we’re not going to allow the renminbi to gain 20% like you have demanded we do”… Smile… HA!

I just don’t see where the US gets off telling other countries that buy our debt, and keep our economy from collapsing, and the dollar from defaulting, what to do with their currency… I’ll tell you right now, that the US government, doesn’t hold true the idea that each country has an obligation to its people/citizens to provide price stability, and no to debase their currency! Other countries do… And that’s where the rubber meets the road folks…

Having said that… It is thought that the Bank of Japan (BOJ) came back into the markets to sell yen (JPY) again last night, as yen fell from 84.50 to 85.40 in a manner of minutes, although unlike last time, the Ministry of Finance (MOF) did not confirm that they had issued instructions to the BOJ to intervene… But, that’s all it could have been… It looks like intervention, walks like intervention, and smells like intervention… It was intervention!

But guess what? The markets volleyed back the BOJ’s serve, and pushed yen back to a level that was even stronger than the 84.50 it started out at! The markets are taking the fight to the BOJ and MOF… Good Show!

I just saw Marc Faber on the Bloomberg TV channel, talking about Asia… I see where he agrees with me that the Asian currencies (including the Pan Asian currencies) are the best-positioned currencies to rally and gain versus the dollar. Of course, I would have gone further to say the commodity currencies wouldn’t be far behind… But, you know me… I’ve got to get my two-cents in whenever I can!

I have been telling you about the fight going on in the markets over the Brazilian real (BRL)… The Brazilian Central Bank (BCB) has been rumored to be spending $1 billion per day on buying dollars and selling real, in an attempt to keep the real from getting too strong, and the markets are fighting back with their own treasure chest of money… Last week, there were 284,967 more bets on the real rising than falling; that’s the most since June of 2007. Basically, each contract is worth $50,000, so doing the calculation, and using my new math skills, I come to more than $14 billion!

As I’ve always told you, central bank intervention will not work in the long run… You see, in the real’s case the rise is fundamental… Their economy is strong, their exports are strong, inflation is heating up, and in need of higher interest rates, which already are present in Brazil… Those things speak of a stronger real… In the long run, after the government gives up, or runs out of money…

Not that this has anything to do with the Brazil story, but running out of money reminds me of a quote that I’ve used at my presentations before, and always gets a rise out of the audience, and that is what Margaret Thatcher said about socialism… “The problem with Socialism is that eventually you run out of other people’s money.”

I guess that would be a good one for everyone to remember here in the US…

OK… Back to Brazil… The Brazilian government has made claims about “not losing” this battle for the real… I don’t believe the Brazilian government has had a chat with reality lately… It would behoove them to do so, before they go and throw billions more down the drain…

OH! And looky here! I see where Petroleo Brasileiro, Brazil’s state-controlled oil company, will be able to develop mammoth offshore oil reserves after raising $70 billion in the largest share offering worldwide… This just means more demand for reals, folks…

But… Like I always do, when talking about Brazil… It is to remind you that Brazil is an emerging market, and strange things can happen in emerging markets. So be careful to use only the “speculation money” of your portfolio here…

OK… Enough of that! How about what’s going on here in the US besides the President wasting time urging the Chinese to allow a 20% appreciation in their currency? Well… Former Fed Chairman, Paul Volcker, is telling people to “not worry about deflation here in the US.”  Hmmm… Sounds like old Paul must have become a Pfennig Reader! I’ve been saying that for some time now, and even showed you some food price items that had been rising…

Well, my friend, and colleague over at the Sovereign Society, Eric Roseman, pointed out to me the other day that there are some indexes that track agriculture are really beginning to move higher… For instance, the Dow Jones- UBS Agriculture index is up 27.7% this year… Hmmm… Didn’t I tell you once that the Fed/Cartel will take their eye off the inflation ball, concerning themselves with deflation, and before they know it, inflation will be soaring, and they’ll rush to hike rates, but they will be so far behind the inflation 8-ball… Well… It’s beginning to look like that forecast will come to fruition, eh?

Recall a couple of weeks ago, I told you that there were reports that back customers with time deposits (CD) were allowing them to mature, and moving the dollars into checking accounts, so they would have liquidity? Well… Time-deposit balances declined from $2,365 billion on January 1, 2010 to $2,165 billion on June 30, 2010, as $200 billion in maturing CDs were not rolled over. Out of the $200 billion decrease in CD balances, consumers used $29 billion, or 15%, to pay down credit card and other revolving debt, according to the guys over at Market Rates Insight…

I’ll tell you one thing… Those people need to be opening EverBank checking accounts, because the EverBank checking account, besides being called the “Best Checking Account in the country” by Kiplinger’s, also pays interest on the balance, that beats the national average by a country mile!

OK… For those of you who don’t like it when I advertise something in the letter, sorry… For those of you who don’t already have an EverBank Checking Account, what are you waiting for?

Well… Of course, basically, I would be telling those people that they need to shift some of their dollars to currencies and precious metals… But, that’s my message wherever I go, people wanna know, and I tell them… Diversify a portion of your portfolio out of dollars and into currencies and metals…

The US data cupboard today has August Durable Goods, and New Home Sales… Durable Goods data has been quite volatile in recent months, and I expect August to be no different. New Home Sales are expected to rise… I’ll bet a dollar versus a Krispy Kreme that the only way this happens is if the Home prices fall…

Then there was this… From The Washington Post

Senate Democrats said Thursday that they had abandoned plans for a pre-election showdown with Republicans over taxes, postponing any vote on extending Bush administration tax cuts until after the November midterms…

You don’t think the decision to delay this vote on taxes has any thing to do with the mid-term elections, do you? HA!

To recap… The one-day of profit taking is over, and the currencies are back on the rally tracks this morning. The euro is back over 1.34, and gold is knocking at the door to $1,300, with silver near a 30-year high! It looks like Japan intervened last night, temporarily taking the yen weaker, only to see the markets reverse the trade, and push yen stronger! The President met with China and Japan yesterday… I doubt anything will come of it, and it will turn out to have been a waste of time…

Chuck Butler
for The Daily Reckoning

Silver Nears 30-Year High originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Silver Nears 30-Year High




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

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On Abnormal Returns TV with Tadas Viskanta

September 24th, 2010


Just a quick note to let readers know that yesterday I spent a half hour talking with Tadas Viskanta of Abnormal Returns on Abnormal Returns TV.

We discuss a wide variety of topics, with an emphasis on the VIX, VIX futures, VXX, contango, futures-based ETFs, and related subjects. We also talk a little bit about the ideas behind my last three posts on the blog:

  1. Diversification, Momentum and Sidestepping the 2008 Panic
  2. VIX and Historical Volatility Settling Back in to Normal Range
  3. The Education of a Trader

Thanks to Tadas for the opportunity to experiment with a new media platform. Going forward, I expect to be showing up in other corners of the internet not just in print, but also in an audio and/or video format as well.

Related posts:

Disclosure(s): neutral position in VIX via options



Read more here:
On Abnormal Returns TV with Tadas Viskanta

ETF, OPTIONS, Uncategorized

The All Important Level to Watch on the US Dollar Index

September 24th, 2010

It seems as though the Federal Reserve once again is taking aim squarely at the US Dollar Index with talk of ‘likely’ (or possible) injections of liquidity into the economy in the form of a second major Quantitative Easing plan should the economy falter.

While QE may indeed help stocks and the general economy – should it come to that – the major casualty of a new round of easy monetary policy will likely be the US Dollar – weakened by the injection of liquidity.

That being said, let’s take a quick look at the critically important weekly technical (chart) level to watch in the US Dollar Index, as it reflects confluence support.  Any further breakdown under this support would trigger a major chart sell signal.

Let’s see it on the Weekly Frame:

From a chart perspective, the level to watch is abundantly clear.  It’s roughly the $80.00 index level as seen above.

First, “Round Numbers” often provide their own support or resistance, and serve as a pure price level to watch.

Second, the 200 week Simple Moving Average rests currently at $80.04 – it’s a level that has been important in the past, halting the earlier decline in August.

Finally, the 61.8% Fibonacci Retracement as drawn (from the November 2009 low to the 2010 high) rests at $79.75.

These three chart levels align at the $80 level to form an important confluence support… and thus turning point in the market.

Should the Dollar continue its decline through this confluence support, then that would set-up a potential longer-term target for a move back down to the $74 level seen in late 2009.

Should the Federal Reserve actually go through with its plan to “help the economy in any way possible,” then we can anticipate a move that could take us down to that level.

What seems to be happening now is market expectations of action, rather than actions themselves, but whatever the case, participants in the Dollar will need to watch the $80 level extremely closely.

A break under that level could be quite significant.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Read more here:
The All Important Level to Watch on the US Dollar Index

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The All Important Level to Watch on the US Dollar Index

September 24th, 2010

It seems as though the Federal Reserve once again is taking aim squarely at the US Dollar Index with talk of ‘likely’ (or possible) injections of liquidity into the economy in the form of a second major Quantitative Easing plan should the economy falter.

While QE may indeed help stocks and the general economy – should it come to that – the major casualty of a new round of easy monetary policy will likely be the US Dollar – weakened by the injection of liquidity.

That being said, let’s take a quick look at the critically important weekly technical (chart) level to watch in the US Dollar Index, as it reflects confluence support.  Any further breakdown under this support would trigger a major chart sell signal.

Let’s see it on the Weekly Frame:

From a chart perspective, the level to watch is abundantly clear.  It’s roughly the $80.00 index level as seen above.

First, “Round Numbers” often provide their own support or resistance, and serve as a pure price level to watch.

Second, the 200 week Simple Moving Average rests currently at $80.04 – it’s a level that has been important in the past, halting the earlier decline in August.

Finally, the 61.8% Fibonacci Retracement as drawn (from the November 2009 low to the 2010 high) rests at $79.75.

These three chart levels align at the $80 level to form an important confluence support… and thus turning point in the market.

Should the Dollar continue its decline through this confluence support, then that would set-up a potential longer-term target for a move back down to the $74 level seen in late 2009.

Should the Federal Reserve actually go through with its plan to “help the economy in any way possible,” then we can anticipate a move that could take us down to that level.

What seems to be happening now is market expectations of action, rather than actions themselves, but whatever the case, participants in the Dollar will need to watch the $80 level extremely closely.

A break under that level could be quite significant.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Read more here:
The All Important Level to Watch on the US Dollar Index

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Join Corey Today for a Lunchtime Chat on Enhancing Retracement Trades

September 24th, 2010

I wanted to invite you to today’s (Friday, September 24) online chat session during lunch – 1:00 EST / 12:00 CST – with the MoneyShow’s eTrading Expo entitled:

Five Ways to Enhance Your Retracement Trades.

The link above is the direct link to my topic page and registration info.

It will be a brief 20-minute online chat session where I will discuss tips and tricks on how to increase your accuracy when trading retracement set-ups and then take a few questions from attendees.

From the official description:

“What are 5 quick ways you can improve your retracement trades? Come chat live with Corey Rosenbloom, CMT as he shares five important technical signals and indicators you can use right now to put on lower risk, higher probably retracement trades”

The eTrading Expo features similar chats all day Friday and Saturday from leading industry experts including Tom Busby, John Carter, Toni Hansen, John Bollinger, and many more.

Full speaker list, details, and registration are located at the MoneyShow’s eTrading Expo introduction page.

There, you will also be able to view/attend free full hour-long session from experts at the Futures and FOREX Expo going on right now in Las Vegas.

I hope to see you there this afternoon!

Corey

Read more here:
Join Corey Today for a Lunchtime Chat on Enhancing Retracement Trades

Uncategorized

Join Corey Today for a Lunchtime Chat on Enhancing Retracement Trades

September 24th, 2010

I wanted to invite you to today’s (Friday, September 24) online chat session during lunch – 1:00 EST / 12:00 CST – with the MoneyShow’s eTrading Expo entitled:

Five Ways to Enhance Your Retracement Trades.

The link above is the direct link to my topic page and registration info.

It will be a brief 20-minute online chat session where I will discuss tips and tricks on how to increase your accuracy when trading retracement set-ups and then take a few questions from attendees.

From the official description:

“What are 5 quick ways you can improve your retracement trades? Come chat live with Corey Rosenbloom, CMT as he shares five important technical signals and indicators you can use right now to put on lower risk, higher probably retracement trades”

The eTrading Expo features similar chats all day Friday and Saturday from leading industry experts including Tom Busby, John Carter, Toni Hansen, John Bollinger, and many more.

Full speaker list, details, and registration are located at the MoneyShow’s eTrading Expo introduction page.

There, you will also be able to view/attend free full hour-long session from experts at the Futures and FOREX Expo going on right now in Las Vegas.

I hope to see you there this afternoon!

Corey

Read more here:
Join Corey Today for a Lunchtime Chat on Enhancing Retracement Trades

Uncategorized

If You Own One of These Popular High-Yielders, Pay Attention

September 24th, 2010

If You Own One of These Popular High-Yielders, Pay Attention

My guess is you haven't brought the Restoring American Financial Stability Act (the official name of the just-passed financial reform act) to the lake with you this summer.

At 2,300 pages and filled with 100-word sentences written in complex legalese, the bill — signed into law with much fanfare by President Obama on July 21st — is not exactly light reading.

However, buried in this legislation is Section 171, the Collins Amendment. And this single amendment dramatically impacts income investors. It completely alters the status of one of the more popular high-yield investments.

The good news is that this change will give savvy investors who know where to look the ability to lock in attractive 6-7% yields, investment-grade safety and the potential for capital gains within three to five years.

But this opportunity will not be around for long. The rule changes are already in place. The window is open now, but begins to close in 2013 and shuts completely at the end of 2015.

The high-yield opportunity I'm talking about lies with trust preferred stock, also called trust unit preferred shares or “TruPS.” Banks are usually associated with these shares… but that may be changing. (If you own the preferreds of a bank, they stand a good chance of being trust preferreds.)

You see, TruPS aren't issued directly by the bank. Instead, the bank sets up a new company or off-balance sheet trust. When TruPS are issued, the trust receives the offering proceeds, not the bank. However, the trust then turns around and loans the proceeds to the bank. This convoluted financing was worth it because banks were allowed to count TruPS toward Tier 1 capital — a basic measure of a bank's financial strength. During the height of the financial crisis, banks issued $149 billion of trust preferred stock, according to the Federal Reserve Bank of Philadelphia.

But the financial reform act changes all that. In the future, banks won't be able to include TruPS in Tier 1 capital. The phase out period begins January 1, 2013 and will be complete by December 31, 2015.

This change has major implications for income investors. The biggest is that some banks may choose to redeem their TruPS during the next three to five years. Today, however, these TruPS carry high coupons associated with 30-year investments.

Since TruPS will no longer serve their original purpose of counting as Tier 1 capital, banks will have no reason to hold them. The additional costs of setting up and maintaining the issuing TruPS are unattractive, as well.

That leaves three possible outcomes. First, some banks will choose to do nothing and simply allow their TruPS to mature and not issue any more. Most mature by 2030. Other banks may choose to issue traditional preferred or common stock to shore up Tier 1 capital and then offer TruPS holders the option of converting to these issues.

A third outcome is redemption… and that's where the opportunity lies.

Banks could begin calling TruPS as early as October of this year. If you buy TruPS below their par value (typically $25), this will lead to potential capital gains if the security is called. Of course, that is in addition to the high yields they pay while you wait. Remember that these securities were issued with a long-term outlook, so the yields they pay are associated with 30-50 year bonds instead of the 3-5 year outlook before the law changes.

Action to Take –> If you want to do some hunting for trust preferred securities on your own, I'd recommend QuantumOnline.com. The website has a list of current TruPS on the market that you may want to investigate. (It's free, with registration. Look under than “Income Tables” tab.) Remember, not all TruPS will be called, so you have to be selective. Be on the lookout for those trading below par value and backed by investment-grade credit ratings.


– Carla Pasternak

P.S. –

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