Global Macro Trading Journal

[ralph00]

Quote from Ghost of Cutten:

Aren't there better yields in Nevada and Arizona? If I could get 30 year fixed-rate dollar financing and lived in the USA, I would be investing in those locations now.

Yes. And cap rates are higher in North Philly and Norristown than they are in Gladwyne.

Rental yields are just a starting point. There are other costs involved with buying real estate in an area you do not live in or are not familiar with.

On the other hand, someone on this thread is buying in D.C. Prices are so high there (vs.rents), the best you can hope for in non-ghetto areas is to break even. I have friends in D.C. begging me to take their money to invest in Phila. My trouble is after hustling around with the buildings for so many years, I'm having too much fun (and making a few dollars) trading.

 

[darkhorse]

Quote from Daal:

Couldn't disagree more with this. Bernanke doesn't think QE3 is his last bullet. He doesn't think a central bank can EVER run out of bullets. If you disagree with that, its not relevant, he is the one controlling the printing press

The bar for easing a higher than the market thinks but it doesn't mean they are afraid to use due fears of not having 'bullets' left or anything like that

What, we disagree? Shocker!

First off, the Fed is very aware of the fact they have constraints - not policy constraints, but political ones.

Dallas Fed President Richard Fisher may be a nobody inside the Fed's halls, but he had a clear point in stating the following:

“I believe that were we to go down the path to further accommodation at this juncture, we would not simply be pushing on a string but would be viewed as accomplice to the mischief that has become synonymous with Washington.”

As for the printing press, you are missing the reality of the Fed's situation.

They may be myopic, but the Fed is still aware, at least marginally, of potential danger scenarios:

* If QE3 is implemented and fails utterly, there is a "loss of faith" risk, as outlayed by SpecterX, in which the psychological power of the Fed is lost and "bad inflation" gets unleashed with a vengeance.

* If QE3 is implemented too aggressively, especially in an election year with a flailing incumbent president, there is possible blowback danger to the Fed's independence, as a Republican congress and Republican president could ostensibly unite against the Fed.

So, yes, Bernanke has a printing press with theoretically infinite capabilities-- my response to your pointing that out is "no shit sherlock," i.e. who could possibly miss that, especially given his famous speech on the topic.

But a theoretical lack of constraints is not the same as a real world / political lack of constraints.

Bernanke may wind up taking us over a fiscal cliff in the end, but he nonetheless remains aware that failed policy actions have consequences, and he will not be in any hurry to risk the jump unless necessary.

 

[darkhorse]

Bernanke is to gold stocks as wooden stakes are to vampires

 

[darkhorse]

p.s. To further clarify: The "last bullet" designation applies, I would argue, because if QE3 fails the Fed risks having its gun taken away, either rhetorically or legislatively. At some point, failed policy leads to constrictive political realities (especially if faith in the Fed collapses).

 

[Daal]

Quote from darkhorse:

I should have known better than try to debate you. I tell you that your view of bernanke's beliefs are wrong then you start to quote fisher, classic. Get back to me when you consider Buffett a value investor than we can start to have a rational debate

 

[Ghost of Cutten]

Quote from darkhorse:

p.s. To further clarify: The "last bullet" designation applies, I would argue, because if QE3 fails the Fed risks having its gun taken away, either rhetorically or legislatively. At some point, failed policy leads to constrictive political realities (especially if faith in the Fed collapses).

Alternatively, QE3 failing means the economy gets even worse, so the arguments in favour of soft money get even stronger, thus strengthening the Fed's political position and allowing the beard to do QE as much as he thinks necessary. Less hawks in Congress and the CB = more free hand for Bernanke. Remember, this is the banker who said you can drop money out of helicopters if needed, and Congress appointed him well after he made this viewpoint known. I don't see a further economic downturn in the USA making the hard-money crowd *more* credible.

 

[Ghost of Cutten]

Quote from darkhorse:


Game multiple scenarios -- different versions of the market script. Then go with the script that fits the evidence and is confirmed by price action. No script confirmation, no activity (or trading small and light until more confirmation comes). If the plot changes, change with it. The script doesn't follow a linear path -- it's a Choose Your Own Adventure book.

Longer term, good trading habits are about "right thought, right action." When your perception and internalized levels of understanding are correct, taking the correct action becomes as simple as reaching for a glass of water when thirsty.

So in gold - Bernanke removed one bull point just now, and the market reaction was very negative so far. Scenarios:

i) it's a shakeout. Market should stabilise in a couple of days, then rebound strongly and move to new highs in a couple of weeks. Be long (moderate size) on the first major up day after today, add on a true breakout above the recent highs.

ii) the rally is over, and we're in a trading range until more clarity arrives. Market should fail to rally significantly within the next few days, but not collapse to new lows either, just chop around. Be flat.

iii) the bear market is intact, and this was just a sucker rally. The market should close weak and have another down day tomorrow, and break to new lows (below 1525) within the next 2-3 weeks at most. Short bounces and add to shorts on a break below 1525 on a closing basis.

Thoughts?

 

[darkhorse]

Quote from Ghost of Cutten:

Alternatively, QE3 failing means the economy gets even worse, so the arguments in favour of soft money get even stronger, thus strengthening the Fed's political position and allowing the beard to do QE as much as he thinks necessary. Less hawks in Congress and the CB = more free hand for Bernanke. Remember, this is the banker who said you can drop money out of helicopters if needed, and Congress appointed him well after he made this viewpoint known. I don't see a further economic downturn in the USA making the hard-money crowd *more* credible.

Yeah, except if you believe that, you're not really paying attention...

Your scenario would be credible if we had a Republican incumbent in danger of being replaced by a Democrat.

But we have the reverse -- a fiscally liberal president, who is running against the economy moreso than his Republican opponent, who is likely to lose if the economic situation does not improve.

Add to this the fact that Romney, a challenger who arguably has better than 50/50 odds of winning at this point, has been vocally and sharply critical of easy Fed policies in an effort to play to his base.

Then, for icing on the cake, consider the tea party has not gone away... that the Scott Walker Wisconsin result illustrates a surprisingly hard line attitude to fiscal issues... the popularity of cutters and slashers like Chris Christie... the ousting of longtime senate moderates like Dick Lugar by "hawks" like Richard Mourdock... and finally the reasonable observation that a large and vocal percentage of the American public, falling roughly between Romney and Ron Paul, believes Keynesianism is destroying the country.

The Fed, in other words, is playing to an increasingly hostile political audience. No way in hell they get carte blanche if things keep getting worse. If anything they get more blame, to a chorus of "we tried your Keynesian bullshit, now let's go back to good old fashioned free markets" etcetera.

 

[Ghost of Cutten]

Quote from dhpar:

agree with that. reduced some of my long goldies before Ben puts a cold shower on all this...will rebuy later.

How long have you had The Beard on speed-dial?

 

[darkhorse]

p.s. The rising odds of an anti-Fed, anti-easing, pro-austerity conservative agenda taking hold in Washington could also help explain the collapse in near-term inflation expectations (inverted TIPS curve).