The Credit Crisis Financial Stocks Short Journal

"To keep inflation expectations well anchored, all agreed on the importance of the Federal Reserve continuing to communicate that it has the tools and willingness to begin withdrawing monetary policy accommodation at the appropriate time and pace to prevent any persistent increase in inflation." - Minutes

So the post FOMC hawk brigade mystery is explained, its just talk to anchor inflation expectations

"Nonetheless, most participants anticipated that slack in both labor and product markets would be substantial over the next few years, leading to subdued and potentially declining wage and price inflation. Some participants were skeptical of the usefulness of measures of resource utilization in gauging inflation pressures, partly because of the difficulty of measuring slack, especially in real time."

So it looks like its the FOMC versus two or three perma hawks
 
Congratulations to ralph, Dow 10K. I covered COF CAL today(ACC yesterday), to keep up with my rule of 'do more of whats working, do less of whats not'(got this one from Gartman). My only short now is PPD(enron type company). Now I will just watch ES and wait for this speculative boom to end then pounce a big short, it should end in tears
 
Here's a Paulson clarification on his gold investments. I got this from a private research letter

"Once the Fed began directly buying Treasuries and mortgages, I lost faith in the dollar as a reserve currency for my assets... What I'm looking at is not where gold is going to be tomorrow, one week from now, one month from now, three months from now. What I'm looking at is where is gold going to be vis-a-vis the dollar one year from now, three years from now, five years from now. And I think with a high probability at each of those points, gold will be higher than it is relative to the dollar today. That probability increases the further out you go, and the magnitude of that difference also increases the further out you go. So when I look at what the risk is, the risk to me is far more staying in dollars than it is in gold at this point."
 
Quote from Daal:

Here's a Paulson clarification on his gold investments. I got this from a private research letter

"Once the Fed began directly buying Treasuries and mortgages, I lost faith in the dollar as a reserve currency for my assets... What I'm looking at is not where gold is going to be tomorrow, one week from now, one month from now, three months from now. What I'm looking at is where is gold going to be vis-a-vis the dollar one year from now, three years from now, five years from now. And I think with a high probability at each of those points, gold will be higher than it is relative to the dollar today. That probability increases the further out you go, and the magnitude of that difference also increases the further out you go. So when I look at what the risk is, the risk to me is far more staying in dollars than it is in gold at this point."
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That's a direct quote from Paulson's lunch talk at Grant's Investment Conference three weeks ago. I'm not sure where you got it, but whoever is writing that investment letter better be careful. I don't think Grant's would be pleased.
 
Heres a krugman article on why the monetary base expansion has not been inflationary
http://krugman.blogs.nytimes.com/2009/06/13/way-off-base/

However I strongly disagree with his notion that "the problem was that since banks weren’t lending out their reserves and people were keeping cash in mattresses, the Fed couldn’t expand M2."

The banks dont need to just lend, they can also buy assets. If Pimco sells a UST to a bank, they will get bank reserves in return, the reserves will start to be called M1 or M2 and the bank will show less excess reverses. In order to get the banks buying assets all the fed needs to do is to tax excess reserves, USTs and GSE Mbs buying would drive up the money supply. Furthermore if the Fed bought USTs directly in the open market(instead of using the dealers) that would drive up M1 and M2
 
It looks like we are not at a top yet. This is from private research I started now to have access to

"Intermediate-term Outlook (2 weeks – 2 months)– updated 10/12 – somewhat bullish
Five up days last week has not done anything to damage the idea that the intermediate-term trend is up. I don’t see a top just yet. A few years ago, Lowry’s did a study on market tops .For those who would like to purchase it, it may be obtained here: http://www.lowrysreports.com/research_studies.cfm The basic finding of the study was that breadth has consistently topped out before the market. They primarily looked at 52-week new highs and the Dow Jones Industrial Average. I decided to examine this concept this weekend. I used the S&P 500 rather than the DOW. In the charts below the top panel is the S&P 500. The bottom panel is the % of NYSE stocks that are hitting 52-week highs. The panel just above the bottom panel is the NYSE advance/decline line. My breadth data only goes back to 1970, so that’s as far as these charts go. Instances are lower than I’d prefer for a complete study, but you’ll note there is definitely an underlying theme to the instances that do exist. The 1st chart is the 2007 top."

He shows charts of tops since the 70's up to now, they all topped out when breadth was lost(except in 76 where the AD line made a new high but the market topped). Usually through divergence between new highs and the AD line(NH and the AD would not make a peak but the market would). Right now the AD line made a new high, the new highs is bellow Sep levels but by very little, so there seems to be further to go in this rally
 
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