Fed says "Screw you world"

That is in essence what they have said with their statements today. Keeping rates low until 2013 and saying we are standing by (the printing press) just in case whatever has collapsed the yield on the short term Debt paper and has done pretty much the same for the 5 and 10 year as well. So the short term paper flippers bailed. So where are these guys going to drop their money? Exactly where Ben wants them to. The equity markets. 

This is simply an abuse of the reserve paper of the world. Expect the Forex markets to go nuts.
The Swiss are probably going to intervene again. Too many people looking for lifeboats and not enough lifeboats (Gold, Swiss etc) will force the ticket price on the life boat up.
Good times. Good times.

10 comments:

Brian O'Flanagan said...

not enough lifeboats indeed. I noticed today that gold is now outperforming silver year-to-date. That is incredible, given the run that silver had in the Spring. You may know I've been pretty negative on silver, but it is starting to look much more attractive now.

Warren James said...

I can't help looking at the current market correction and keep wondering whether that is the movers and shakers desperately trying to push silver under $36/ounce - at least once - to stave off the derivative Armageddon that Wynter Benton speaks mysteriously of. After all, we are nearly 30 days into the postulated 60-day range (of silver over $36).

Benton's latest post 'Message to Jes Staley' (7th august) [ link ] is downright weird. Jes Staley is a JPM guy, Ken Lewis is bank of america. The latin phrase roughly translates as 'men believe what they want to believe' (according to google).

Sorry to add a Benton reference. You're aware at this point that I think it's bunkum, however I have revised my theory and I realise that a legitimate core strategy with a bit of misdirection thrown in also explains what we have seen. The latest messages would seem to indicate they don't really care what others think, have dropped the drama and are actually using that Yahoo message board as a comms channel to JPM.

Given the events of the last week, anything seems possible.

Louis Cypher said...

Agreed on Silver. When it blows it's going to be spectacular. I'm not going to feel comfortable with it until 41/42 is breached decisively though.

Louis Cypher said...

@ Warren,
I don't know what to make of the WB message.
If you subscribe to the theory that by attacking Silver you can force Gold down then what we have seen this week and last makes perfect sense.

Robert LeRoy Parker said...

Fofoa's focal point explanation makes sense.

Warren James said...

@Louis, sorry - not sure I understand, do you mean that gold movement would have been even more wild had silver not been restrained?

I had interpreted it as the commodity element of silver being overwhelmed by the sell-off.

re: the WB message - I will keep monitoring to the end of the 60-day period if silver keeps above $36, but other than that there's not enough data to dig much deeper (if Amber is still out there then please feel free, come shed some light). They don't appear to want to drum it up like last time and I think folk are losing interest already judging from the lack of responses to the thread. In the meantime looks like we have plenty of other stuff to worry about. Was an interesting experience to watch the AUD $75+ steep correction in gold. This is just crazy action.

Yukon Cornelius said...

Are you guys really thinking silver is poised to explode upward? Genuinely asking here because I just don't see it. Are you just thinking that due to gold's power rise silver must follow suit? To be honest I'm not sold on that either. For me Platinum is a crucial piece of this because it seems to indicate that it's going up or gold is about to drop - take your pick.

You know I love me some silver, but right now it's way back down the list eclipsed by things that are showing me more upside. Someone sell me on why silver is going higher. :)

Louis Cypher said...

Warren,
Maybe. So we had 50 dollar plus moves but it's really just a small percentages whereas Silver was getting 5 and 6% moves down. So really Gold wasn't that spectacular. It seems spectacular breaking nominal highs and because we all got in early.

But the usual tell tale signs of a beating were there last week. HUI sell off, silver beating ....gold usually goes down. Except Gold didn't.
Genuine fear with the Pavlovian run to US bonds, Swiss Franc and now Gold.
The Swiss have to react, the Fed reacted today. What's left? You have to like Silver here even if it's just in the short term just because it got so beaten up. However,

Yukon, I won't be convinced of a real move until it gets beyond 41/42 decisively because that would nullify my cautious stance that 48 was the blow off top and 38.50 'ish is a dead cat bounce until we head back down and revert to the mean.

I prefer to be cautious and am not entirely convinced of the FOFOA argument that Silver is a pure commodity play. For me it depends on how fast we slide into the abyss. Given enough time Silver is a good play but ultimately I want to be all in Gold and only Gold. So for me Silver has some catching up to do but I ain't buying. Platinum and Palladium for me are just commodities. Palladium being the better bet assuming we don't slide in the abyss.
For example if we woke up tomorrow morning and it's all in the crapper then Gold and only Gold. If it takes 6 mths plus then Silver gets time to get traction again in price and in hearts and minds.

When the market digests what the Fed said today and what the implications are. Throw in the Muni downgrades. Throw in stories of banks charging you to hold your money. The message is clear in my mind. "Get out of bonds" and go equities.

They were very clear in their language. Rates to be held until 2013. We are standing by to do whatever it takes.

Maybe I'm too negative. But ultimately to paraphrase Brian the other day "people are being forced into being speculators in order to simply preserve what they have"
That is just wrong on so many levels. Most people want 9-5 and go home and have a beer. They shouldn't have to worry about having a second job to make ends meet or speculating in the markets just to keep pace with the constant erosion of their savings. So again we will be fleeced if we continue to play in a market where we only get to play 8 hours and the smart guys get to play an extra few hours to run the stops and force margin calls.
Just my 2 cents.

Yukon Cornelius said...

LC,

I see silver dropping to $35 before any new moves upward happen, but I've been wrong before. I tend to agree that silver is manipulated, but I'm of the opinion that it's being manipulated more upward than downward. Yeah, I know I'll lose whatever silver club privileges I had left with that opinion. *grin*

When you say that you don't agree with FOFOA about silver being just a commodity I assume that you're saying you believe it is or will become a monetary metal. It's possible, but I am dead on in agreement with Jim Sinclair on the future being a virtual reserve currency. Hell, it's already here with things like Paypal, and in computer game currency. I read an article today about Activision joining the 'League of Moneychangers' with their next title having some kind of real money transfer system in the game with them taking a cut. It's genius honestly, and the way of the future. I do believe silver will always have a value, but that value I don't believe will be bolstered by it achieving any level of true monetary status.

Absolutely agree with the message, and I don't think it's a lie. Get into equities instead of bonds - at least at this point. I see far more risks to bondholders than shareholders in many circumstances. I believe they are willing to use as much duct tape and bailing wire as they need to keep this thing going. No hard landing is my call. It simply won't be allowed to happen and I agree with it. As much as some people want to see a total reset and watch the world burn, I don't see anything that could even be remotely thought of as a good outcome from that.

The negativity you have actually fuels my positivity. There's so much negativity out there everywhere you look. Honestly, have you looked at some of these earning reports? Have you seen some of the valuations on some of these stocks? I'm really genuinely positive over things. I can see the news, the pundits, and all the bullshit out there telling everyone how bad it is. I believe there's reasons for this I won't get into here, but just looking at the data everything looks manageable, but as always there's money to be made and power to be gained by the orchestration of all the negativity.

Louis Cypher said...

@ YC,
Given enough time I think Silver could be considered monetary. As you pointed out digital game tokens are becoming money. Given enough time they will gain traction. I just comes down to time in my mind. It also has to become more stable and follow Gold with with steady gains over a long period.
Yes, there are great earnings from companies but I'll counter with a lot of these earnings are coming from job cuts, pay freezes and global outsourcing. I don't count anything made by the Financials as the Fed is giving them free money.
Unless you are literally living on an island then you are correct nothing good will come from a reset except a perverse personal vindication.
On the manipulation up ... well that's a distinct possibility. Proving it would be difficult. We can connect some dots but conclusive proof will be elusive.