Saturday, September 15, 2012

Pushing On A String.

Good Day Friends.

Back after a long sabbatical. The career change thingy is half way through and I think the final result of the move will be known by Jan 2014. Till that time, I would depend on charity and learn something new, like French or some other silly things or travel a bit. We will see what the future brings.

But boy o boy, what a three week it had been. Now we have unlimited and yet sterilized bond buying by ECB and unlimited QE by Ben the printer of the debt monetization agency of USA. Bank of Japan has been doing it for last 30 years and we know where that leads. Now we have to wait for PBC of China to start its press and the whole world will be awash with money.  Before we go any further let us just laugh a little with the joke that is on us.

That explains QE for us , laymen, very nicely isn’t it?

The funny thing is, I had written before, possibly sometimes in June, that I expect the QE in September. And yet I was not long. Silly me. I forgot that stock market and economy are not the same.  But I hope to get long one more time before the election and have some fun with Barack and Ben. After all, the most powerful men in the world are telling you to take the "risk on" trade. They want to create the feel good factor when everyone thinks that their asset value is going up and so everything must be good. Therefore they will vote for Barack O. And I expect SPX  to test 1600 before the election.  But don’t just jump in to buy stocks just yet because, short term the market is stretched and by the last week of September, I expect a minor correction which should last for a week to ten days. That will be a good, low risk opportunity to go long.

Now that all surprises have been removed, and we will have a perpetual QE on both sides of the pond, does it mean, stocks will never go down?  Although in short term stock market does not follow economy, at some point the technical will merge with fundamental and it will be good to remember that the whole world is slowing down. How long you can create demand and prosperity with fake money? Didn’t they try it in 2000 when they blew up the tech. bubble? Or in 2005-6 when they created the housing bubble? It was the same Fed who was behind those two bubbles. In the 1st one old hoot Greenspan was in charge and in the 2nd one Great Ben was a party. They gave testimony before US congress that there is no danger of the bubble bursting. You can see how right or wrong they were and why should we believe them now. So while we will get long and take the free money that they are handing out, we should not forget the history and be oblivious to the danger.

Gold and silver is going to reach new high and most likely inflation will start in earnest. Already inflation expectations are above 5%. I will also be buying TBT for a long haul.

We are entering a very exciting phase and the rules of the engagement have been changed. So be careful with your investment decisions and do not chase short term gains, unless you are nimble and know what you are doing.

We will continue our discussion. For now lets enjoy this beautiful weekend.
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