asia and the metals

Good morning all,

Well, yesterday was nice now, wasn't it? They say a rising tide lifts
all boats, and yesterday was a perfect example - a little something for
everybody. I think only energy and e services were off, but this only
hurt if you were playing the sector pure. If you simply owned a natural
resource fund, you did fine as the other stuff counterbalanced the
energy. Case in point, my FSESE (fido e services) was off 2.5% while my
RSNRX and PSPFX (both global resource funds) were up ~.4%. And one of
the big gainers was the precious metals sector - up anywhere from 1.2%
to 2.4% or so.

And indeed, gold and the pm's staged a pretty solid bounce off the lows
they touched upon. XAU closed up 2.51 to 137.61 and some of the minor
miners posted double digit gains. Right now gold is at 545.70 -.30,
silver at 9.32 +.02, platinum is 1007 -1 and palladium is 280 +3.

And over in asia, there was a bit of a take back today with Japan
dropping 1.56%, Korea -1.83%, and Taiwan -.22%. The gainers were China
+1.0%, HongKong +.02% and India +.26%.

>From what I heard some of the losses were chip related and that would
hit japan, korea and taiwan the hardest.

Also, in passing, I heard some mishmash about the fear of investors
losing confidence in japan. Frankly, while there may be some
inferiority complex cultural stuff due to many years of badtimes, the
belief that others see things the same way is unjustified paranoia - in
my humble opinion. Hey, from where I see things, Japan's recovery is
the real deal. Besides, with the addition of the china trade, top line
growth is so strong that the sheer volume alone forgives all but the
most deadly of sins.

and so it goes,

peace,

rono

Re: asia and the metals

Rono,

All of these are great long term holds but they will reset themselves
in the coming months.

Japan - get out unless you are prepared for the NIkkei to test itself
in the 1400's
Gold - get out
Oil - watch carefully

Every one of these markets is over extended. You cannot trust the conventional
wisdom on these matters or what info you'll find regarding them.

I think we have one last rally left in this market.

After the 1st quarter the only thing that will go up is a reverse index.

Oh well - maybe you'll believe me next time around :)

Bernanke made it very clear he will raise rates again. Possibly twice.
An inverted yield curve will slow down the global economy & deflate
asset markets everywhere.

Good luck,

Sanjay

rono <> wrote:
> Good morning all,
>
> Well, yesterday was nice now, wasn't it? They say a rising tide lifts
> all boats, and yesterday was a perfect example - a little something for
> everybody. I think only energy and e services were off, but this only
> hurt if you were playing the sector pure. If you simply owned a natural
> resource fund, you did fine as the other stuff counterbalanced the
> energy. Case in point, my FSESE (fido e services) was off 2.5% while my
> RSNRX and PSPFX (both global resource funds) were up ~.4%. And one of
> the big gainers was the precious metals sector - up anywhere from 1.2%
> to 2.4% or so.
>
> And indeed, gold and the pm's staged a pretty solid bounce off the lows
> they touched upon. XAU closed up 2.51 to 137.61 and some of the minor
> miners posted double digit gains. Right now gold is at 545.70 -.30,
> silver at 9.32 +.02, platinum is 1007 -1 and palladium is 280 +3.
>
> And over in asia, there was a bit of a take back today with Japan
> dropping 1.56%, Korea -1.83%, and Taiwan -.22%. The gainers were China
> +1.0%, HongKong +.02% and India +.26%.
>
>>From what I heard some of the losses were chip related and that would
> hit japan, korea and taiwan the hardest.
>
> Also, in passing, I heard some mishmash about the fear of investors
> losing confidence in japan. Frankly, while there may be some
> inferiority complex cultural stuff due to many years of badtimes, the
> belief that others see things the same way is unjustified paranoia - in
> my humble opinion. Hey, from where I see things, Japan's recovery is
> the real deal. Besides, with the addition of the china trade, top line
> growth is so strong that the sheer volume alone forgives all but the
> most deadly of sins.
>
> and so it goes,
>
> peace,
>
> rono
>

Re: asia and the metals

"Sanjay" <> wrote in message
news:RgPIf.107259$
> Rono,
>
> All of these are great long term holds but they will reset themselves
> in the coming months.
>
> Japan - get out unless you are prepared for the NIkkei to test itself
> in the 1400's
> Gold - get out
> Oil - watch carefully
>
> Every one of these markets is over extended. You cannot trust the
conventional
> wisdom on these matters or what info you'll find regarding them.
>
> I think we have one last rally left in this market.
>
> After the 1st quarter the only thing that will go up is a reverse index.
>
> Oh well - maybe you'll believe me next time around :)

Well, maybe there's a 50/50 chance we will.

>
> Bernanke made it very clear he will raise rates again. Possibly twice.
> An inverted yield curve will slow down the global economy & deflate
> asset markets everywhere.

Why does an inverted yield curve slow down the global economy, per se (post
hoc egro propter hoc)? It would appear you are willing to ascribe to the
conventional wisdom on this.

Personally, I think it depends on why the yield curve is inverted. If it is
because people see a recession coming then, yes it indicates a recession.
This time, I think it is because the Fed is trying to raise short-term rates
at a time when long-term rates are just plain refusing to rise due to market
forces.

I can't personally see any interest rate under 6% as being anything but
expansionary.

-herb

Re: asia and the metals

Herb <> wrote:

> Personally, I think it depends on why the yield curve is inverted. If it is
> because people see a recession coming then, yes it indicates a recession.

No, inverison means banks can't lend profitably. Our perception is irrelevant.

> This time, I think it is because the Fed is trying to raise short-term rates
> at a time when long-term rates are just plain refusing to rise due to market
> forces.
> I can't personally see any interest rate under 6% as being anything but
> expansionary.

Then why drop them below 6%?

Japan has had interest rates at nearly 0% and couldn't fight off a recession.

It has been inverting and flattening out lately. But Bernanke seems set to
do 2 more hikes. Arguably, on it's own it will deteriorate and invert.
2 more hikes will definitely invert.

Re: asia and the metals

"Sanjay" <> wrote in message
news:i0UIf.160025$
> Herb <> wrote:
>
> > Personally, I think it depends on why the yield curve is inverted. If
it is
> > because people see a recession coming then, yes it indicates a
recession.
>
> No, inverison means banks can't lend profitably. Our perception is
irrelevant.

So banks are not making a profit and this leads to recession? I'm not sure
banks are so important anymore. If interest rates are low, someone is
willing to lend money.

>
> > This time, I think it is because the Fed is trying to raise short-term
rates
> > at a time when long-term rates are just plain refusing to rise due to
market
> > forces.
> > I can't personally see any interest rate under 6% as being anything but
> > expansionary.
>
> Then why drop them below 6%?

A desperate attempt to stave off the recession that accompanies every new
Republican administration?
>
> Japan has had interest rates at nearly 0% and couldn't fight off a
recession.

We are not Japan, in so many ways. I was referring to US interst rates. I
think the Fed just needs to put the bullets back into the gun in case they
need to use it again. It seems that monetary policy is not as all-powerful
as those neoclassical economists used to tell us it was.

>
> It has been inverting and flattening out lately. But Bernanke seems set
to
> do 2 more hikes. Arguably, on it's own it will deteriorate and invert.
> 2 more hikes will definitely invert.

It must be nice to have such certitude about the future.

I suspect that I might like Bernanke in that he seems aware of the Fed's
other mandate to maintain full employment. AG was great but way too focused
on inflation.

-herb

Re: asia and the metals

"Herb" <> wrote

> A desperate attempt to stave off the recession that accompanies every new
> Republican administration?

Said another way:

A desperate attempt to stave off the recession that follows every new
Democratic administration?

Re: asia and the metals

Herb <> wrote:

> So banks are not making a profit and this leads to recession? I'm not sure
> banks are so important anymore. If interest rates are low, someone is
> willing to lend money.

Google it. Banks can continue to make profits - they just can't lend
money to business as easily which slows down spending. There are some
pretty good research articles on what an inverted yield curve does
to the stock market and the economy.

> A desperate attempt to stave off the recession that accompanies every new
> Republican administration?

LOL!

> We are not Japan, in so many ways. I was referring to US interst rates. I
> think the Fed just needs to put the bullets back into the gun in case they
> need to use it again. It seems that monetary policy is not as all-powerful
> as those neoclassical economists used to tell us it was.

I agree, we are not Japan. But eventually all the rate cuts lose their
edge. We see that now.

> It must be nice to have such certitude about the future.

Bernanke carefully worded his statements yesterday to imply that there will be
further tightening.

> I suspect that I might like Bernanke in that he seems aware of the Fed's
> other mandate to maintain full employment. AG was great but way too focused
> on inflation.

I don't have a dog in the race. Bernanke seems like a smart fellow. I can't
really say much beyond that.

Re: asia and the metals

Hi Sanjay.

"Rono,

All of these are great long term holds but they will reset themselves
in the coming months.


Japan - get out unless you are prepared for the NIkkei to test itself
in the 1400's
Gold - get out
Oil - watch carefully


Every one of these markets is over extended. You cannot trust the
conventional
wisdom on these matters or what info you'll find regarding them.


I think we have one last rally left in this market.


After the 1st quarter the only thing that will go up is a reverse
index.


Oh well - maybe you'll believe me next time around :)


Bernanke made it very clear he will raise rates again. Possibly twice.

An inverted yield curve will slow down the global economy & deflate
asset markets everywhere"

Well, I can't say I disagree with much of what you say. Uncle Ben
looks like he's good for at least 2 more hikes and my guess is 3.
These will just further invert the yield curve and continue to
encourage foreigners to own dollars (tbills if you will). That will in
turn make $ more attractive relative to other Real stuff. And more
importantly, 2-3 more hikes, will really impact the housing sector and
cause the stock market to decline. How much? Who knows. Same/same
for other asset prices as you point out.

At this point, as mentioned, I've started lightening up and raised 10%
cash yesterday. Depending upon how things go, I'll either raise more
now or later or whenever Capt. Price tells me to do so.

I'm even more believing the scenario will onfold as follows - 2 or 3
more hikes, causing the housing market to decline significantly thereby
bursting the 'housing bubble', bringing about a major stock market
correction of 10-20%, all leading toward the Fed deciding this fall to
start cutting rates. This rate cutting will stimulate the market to go
up like a gd bottle rocket. Ergo, try to raise cash starting now and
sit tight all summer in your best defensive posture and wait for fall
at which time you want to load the stinking boat.

best,

rono

Re: asia and the metals

"Herb" <> wrote
> "Sanjay" <> wrote
>> Herb <> wrote:
>> > Personally, I think it depends on why the yield curve is inverted. If
> it is
>> > because people see a recession coming then, yes it indicates a
> recession.
>>
>> No, inverison means banks can't lend profitably. Our perception is
> > irrelevant.

ISTM that's an exaggeration or just painting way too broadly. First, when we
speak of "the yield curve" it refers to the treasury yield curve. That
inverted a few weeks ago--barely. Bank by bank, CD rates, for one, don't
seem all that inverted, though I'm sure there's an exception or two out
there. Either way, your statement seems to presume that bank income comes
mostly from long-term lending, while expenses derive from paying out
interest on shorter term vehicles. I don't know how valid that is, but one
can sure poke a lot of holes in it with simple mathematics.

> So banks are not making a profit and this leads to recession? I'm not
> sure
> banks are so important anymore. If interest rates are low, someone is
> willing to lend money.

>> > This time, I think it is because the Fed is trying to raise short-term
> rates
>> > at a time when long-term rates are just plain refusing to rise due to
> market
>> > forces.
>> > I can't personally see any interest rate under 6% as being anything but
>> > expansionary.
>>
>> Then why drop them below 6%?
>
> A desperate attempt to stave off the recession that accompanies every new
> Republican administration?
>>
>> Japan has had interest rates at nearly 0% and couldn't fight off a
> recession.
>
> We are not Japan, in so many ways. I was referring to US interst rates.
> I
> think the Fed just needs to put the bullets back into the gun in case they
> need to use it again. It seems that monetary policy is not as
> all-powerful
> as those neoclassical economists used to tell us it was.

Adjusting interest rates downward starting around 2001 did not help?

Seems to me it did.

I agree about putting the bullets back in the gun. But I also think raising
fed rates does tend to put off inflation and tend to keep the stock market
from ballooning, yada.

Re: asia and the metals

"Elle" <> wrote

> I agree about putting the bullets back in the gun. But I also think
> raising fed rates does tend to put off inflation and tend to keep the
> stock market from ballooning, yada.

I love balloons. That's why I like Wonder Bread. They have red, yellow, and
blue balloons on their wrapper.

Re: asia and the metals

Hey Herb,

As for an inverted yield curve, check this article:



best,

rono

Re: asia and the metals

"rono" <> wrote in message
news:
> Hey Herb,
>
> As for an inverted yield curve, check this article:
>
>
>
> best,
>
> rono

Hey rono:

This article seems to recognize what I am trying to say, however awkwardly.
I have no doubt that a coming recession will cause the yield curve to invert
(inverted yield curves do not cause recessions) but other things, such as
high demand for long-term treasuries while the Fed is attempting to raise
short-term rates will also cause an inversion. Not every inversion (albeit
most) has presaged a recession.

I liken this to people thinking that the Great Depression was caused by the
stock market crash (rather than vice-versa). I just don't see a recession
coming. If anything, I am continually amazed by the economy's resilience in
the face of such gross mismanagement. The fact that long-term rates refuse
to rise speaks volumes about people's expectations about inflation (they
don't expect any).

Since we know why the curve is flattening (Fed tightening while foreign
buying remains robust) I see no reason to foresee recession in this. The
world economy seems set to continue expanding as far as I can see.

The Fed's ability to restrict the money supply is greatly hampered by the
fiscal profligacy of our Republican government that would put Johnson
democrats to shame. As long as the President and Congress continue to flood
the world with dollars and the world continues to hold them (what real
alternatives do they have?) interest rates are not going to rise no matter
what the Fed does. As long as inflation remains in check, I see no problems
for the world economy in this.

-herb

Re: asia and the metals

"Herb" <> wrote

> If anything, I am continually amazed by the economy's resilience in
> the face of such gross mismanagement.

These kinds of statements are what makes Herb stupid.

> The Fed's ability to restrict the money supply is greatly hampered by the
> fiscal profligacy of our Republican government that would put Johnson
> democrats to shame. As long as the President and Congress continue to
> flood
> the world with dollars and the world continues to hold them (what real
> alternatives do they have?) interest rates are not going to rise no matter
> what the Fed does.

There I was thinking that global competition was keeping interest rates low.
And always remember, the Republicans are the reason the municipalities,
airlines, steelworkers, and automakers are in trouble.
Isn't union spelled d-e-m-o-c-r-a-t? Nah.

Re: asia and the metals

Hi Herb,


I dont' see a coming recession in the near term either. However, I DO
see a correction in the stock market this year caused by all these rate
hikes. The Fed always seem to raise them once or twice too many times
and with a new guy driving the bus that's out to prove he's tough on
inflation . . . well, I think they'll tighten too much and that will
cause the market to waiver and pull back. Then they'll have to start
cutting and bingo - the market takes off like a gd bottle rocket.

best,

rono

Re: asia and the metals

"rono" <> wrote in message
news:
> Hi Herb,
>
>
> I dont' see a coming recession in the near term either. However, I DO
> see a correction in the stock market this year caused by all these rate
> hikes. The Fed always seem to raise them once or twice too many times
> and with a new guy driving the bus that's out to prove he's tough on
> inflation . . . well, I think they'll tighten too much and that will
> cause the market to waiver and pull back. Then they'll have to start
> cutting and bingo - the market takes off like a gd bottle rocket.
>

Well, if they always tighten too much then I guess they will have to, even
if inflation is tame. Still, that would leave interest rates at levels that
obtained during past expansions. I guess it will be fun to find out. My
only worry is a housing market collapse but I'm not sure even that would be
enough to shrink blue chip profits globally.

Who knows?

-herb