Jump to content

Recommended Posts

Fed fund futures are showing expectations of a quarter point rise by april 2012 and almost 1.25 by end of 2012.

 

http://www.cmegroup.com/trading/interest-r...deral-fund.html

  • how reliable is that indicator?
  • does the Fed have a motive to intervene in that market (as they do in the US gov't debt market)?
  • does the Fed have the means to intervene in that market (as they do in the US gov't debt market)?
  • how does the Fed charging banks 1.25% with one hand have any effect when they are bailing the banks out with the other hand?
  • even if it were possible for the Fed to reap 1.25% in interest payments from an utterly bankrupt banking system, isn't that still below inflation?

The Fed funds rate is a calculated rate produced when the banks lend to each overnight between each others Reserve Account at the Fed where each bank with spare reserves attempts to lend them profitabily to the banks short of reserves.

 

The Fed can attempt to lower that rate by buying assets from the banks at whatever price it wants so that the banks have more reserves. But in that case and when inflation is very high the banks who already have plenty of reserves will lend at a rate that makes their loans profitable in an inflationary environment and the fed will be powerless to get the fed funds rate lower unless it deals with inflation.

 

In a similar manner once inflation rises the fed has no power to reduce yields on US treasuries, other than by acting to reduce inflation, since the yield is what the buyer receives annually after he buys the treasuries at the price he thinks is reasonable with his set of inflation expectations.

 

If fed fund futures are showing higher rates and higher rates dont come then the fed loses credibility and banks expect more inflation and rates rise more anyway.

 

you've misunderstood my 3 questions in bold.

 

I'm not asking if the Fed has the means and motive to intervene in the Fed funds rate. (obviously they do!)

 

I'm asking if the Fed has the means and motive to intevene in the Fed Funds futures market.

Share this post


Link to post
Share on other sites
The current pullback seems to have similarities to the June/July 2010 correction, the June/July 2009 correction, and the Jan/Feb 2010 correction. Perhaps the Jan/Feb 2010 comparison is the most pertinent due to the time of year and the fact that that followed a rally that failed to set a new high, like our last rally.

 

I wouldn't mind a spike down to $1250-1300; that would make me feel good about recommitting cash.

The chart above suggests a brief dip to 1300 is possible, which looks a good buy. But then I always choose to look on the bright side of volatility.... with gold [not so with silver].

Share this post


Link to post
Share on other sites
you've misunderstood my 3 questions in bold.

 

I'm not asking if the Fed has the means and motive to intervene in the Fed funds rate. (obviously they do!)

 

I'm asking if the Fed has the means and motive to intevene in the Fed Funds futures market.

 

I admit given the improving situation in the US economy that it did not occur to me that the Fed was altering the fed funds futures for their purposes. i am sure though that the fed will want definate indications that the recovery is not going to fade away before it begins attempting to persuade people rates are going to rise if nobody thinks they are as you are suggesting with manipulation of the futures. Either way I cannot be the only person in the world who thinks that the fed funds rate is going to be higher next year.

 

You asked earlier why an improving house market meant a firmer self sustaining recovery. It means that people with cash doing nothing or people saving for worse times are more likely to spend money on the usual things that increase economic activity. The US has exceptionally low rates and it is pretty clear they will not be held exceptionally low for very much longer even if they continue to be low for many years.

 

But it is easy to talk, how about i bet you 100 pounds that the USD will not be repudiated by July 2012?

Share this post


Link to post
Share on other sites

Yeah, I think this is a good point to purchase some on my averaging strategy for the SIPP. GBP 846 looks cheap in comparison to recent prices. Doesn't mean it couldn't be even cheaper soon. :)

Share this post


Link to post
Share on other sites
I admit given the improving situation in the US economy that it did not occur to me that the Fed was altering the fed funds futures for their purposes.

 

so you've avoided my question.

 

even if somehow you do think the US economy is improving, you can't ignore that the fiscal position is absolutely dire.

 

You asked earlier why an improving house market meant a firmer self sustaining recovery. It means that people with cash doing nothing or people saving for worse times are more likely to spend money on the usual things that increase economic activity.

 

how is allocating capital to real estate (a fiat asset) instead of allocating it to the means of production going to be of use to the economy?

 

But it is easy to talk, how about i bet you 100 pounds that the USD will not be repudiated by July 2012?

 

do you assume that I have not already by now allocated my surplus capital to profit from my expectations?

 

once we shake-off most of the banksters (give it ~3 years)

 

Share this post


Link to post
Share on other sites
Yeah, I think this is a good point to purchase some on my averaging strategy for the SIPP. GBP 846 looks cheap in comparison to recent prices. Doesn't mean it couldn't be even cheaper soon. :)

 

 

I am keeping powder dry until June. However, if it crosses 1500 anytime before that I will take a plunge. Still planning to buy at least 5 sovereigns per month.

Share this post


Link to post
Share on other sites

I spoke to a few dealers today about buying some physical at these lower prices,non available but would sell at £880.00.

Clearly the CONmex is not reflecting the physical/real market at all.

So i say trade your ETF's and other pieces of paper to your hearts content,but dont be suprised in what the future holds.?

BE WARNED.!!!!!!!!!!!!!!!!!!

Share this post


Link to post
Share on other sites

I don't often post here but may have something of interest. I've developed a system that gives me buy and sell signals and got some interesting ones recently on gold stocks / ETFs.

 

The system shows the underlying stock or ETF in blue with my indicator in black - where a double top or bottom occurs on my indicator, this is either a sell or buy signal. Here are some examples. I've marked out the double tops / bottoms in red and connected the indicator signal point with the corresponding price point on the stock chart.

 

It's a proprietary system I've developed and I think it may be original - I prefer not to post the details of how it works as I've had ideas taken from me in the past that other people have either passed off as their own or simply stolen from me.

 

GoldCorp signals

Screenshot2011-01-20at221805.png

 

GoldCorp

Screenshot2011-01-20at225250.png

 

Here are the corresponding buy and sell signals on a standard chart. Buy signal on 25th May, Sell signal on 28th June, and sell signal on 6th December. You can see the signals precisely pinpointed switches in trends in this stock.

 

 

Barrick Gold Corp signals

Screenshot2011-01-20at221103.png

 

Barrick Gold Corp

Screenshot2011-01-20at225922.png

 

Buy signal on 25th August and sell signals on 29th December and 3rd January. Didn't nail the exact points but good signals nonetheless.

 

 

GDX signals

Screenshot2011-01-20at223721.png

 

GDX

Screenshot2011-01-20at230241.png

 

Buy signal 28th July, sell signal on 3rd January. GDX can be seen as a proxy for Gold, the sell signal appearing just prior to the recent sell off in Gold when it was very close to it's all time high.

 

I also had a sell signal on GDXJ on 4th January, similar chart to GDX.

 

 

 

Any time I get another gold related buy or sell signal I'll post it here, what are the main gold stocks I should be looking out for? I don't want a huge list just the key ones.

Share this post


Link to post
Share on other sites

The FED can suppress long term rates by buying as many treasury bonds as it wants... Nevertheless, you might find this chart interesting.

 

goldcore_bloomberg_chart2_09-12-10.png

 

If the government could alter the long term interest rate structure why did all those millions who lost their homes have to pay 4.5% interest? Obviously the future is going to have higher inflation in it than the last few years of near economic death. With higher inflation comes higher interest rates.

 

Even so, like International rockstar, you can be confidant that interest rates will not be raised sufficiently to prevent inflation.

Share this post


Link to post
Share on other sites

Some thoughts on Gold.

On the daily chart, it looks as though we may be close to a buying opportunity. In the past year, every time the Daily RSI moved below 40, it has presented a good entry point. Noted support around 1275-1300 level.

 

Screenshot2011-01-21at45952PM.png

 

 

However, should this fail and we see a more substantial correction, then from a longer term perspective, it looks as though the 55 week EMA (combined with a weekly RSI reading below 50) would present a good alternative entry point. Currently around 1250.

 

Screenshot2011-01-21at51734PM.png

 

 

 

 

Share this post


Link to post
Share on other sites
On the daily chart, it looks as though we may be close to a buying opportunity. In the past year, every time the Daily RSI moved below 40, it has presented a good entry point. Noted support around 1275-1300 level.

 

However, should this fail and we see a more substantial correction, then from a longer term perspective, it looks as though the 55 week EMA (combined with a weekly RSI reading below 50) would present a good alternative entry point. Currently around 1250.

Cool charts. 1300 looks like pretty solid support to me. I guess whether you were waiting to buy there, or lower, would depend on how much of your worth was already in gold; if next to nothing, it would make sense to buy gold around here..... with the risk being that gold could turn and rise.

 

No more buying for me... just sluicing for the stuff! B)

Share this post


Link to post
Share on other sites
Any time I get another gold related buy or sell signal I'll post it here, what are the main gold stocks I should be looking out for? I don't want a huge list just the key ones.

I would like to suggest GDX and GDXJ my reason being they cover a large no. of underlying stocks and they probably represent a lower risk way of plAying the market for the many newbies who will soon be trying to pile in to the great Golden Bull.

 

I think the banks and financial institutions will start to become big buyers of these indexes as they want to gain exposure to these miners but not a control or dominance of any one stock so these sorts of vehicles will suit them fine.

 

Great work BTW.

Share this post


Link to post
Share on other sites

Is GDX a good investment for buy and hold ordinary investors?

 

I am not so sure. Still trading at March 2008 levels.

 

Gold payed off immediately. Silver after a long 5 year wait. But GDX ? A waste of time.

 

Share this post


Link to post
Share on other sites
Is GDX a good investment for buy and hold ordinary investors?

 

I am not so sure. Still trading at March 2008 levels.

 

Gold payed off immediately. Silver after a long 5 year wait. But GDX ? A waste of time.

The miners are more volatile and yes they are still cheap relative to the underlying metal inspite of two stellar years.

 

If you are bullish on gold then these represent a good opportunity IMO.

 

Of course they aren't everyones cup of tea but thats more to do with the paper nature in general.

 

There are of course many ways to play this bull but you can only win it if you are in it.

Share this post


Link to post
Share on other sites

I think you were just too early.

 

Is GDX a good investment for buy and hold ordinary investors?

 

I am not so sure. Still trading at March 2008 levels.

 

Gold payed off immediately. Silver after a long 5 year wait. But GDX ? A waste of time.

 

Share this post


Link to post
Share on other sites

The mean price I paid for GDX is 44$, so I am still ahead after this correction.

 

It is stated that miners provide a leverage to the gold price. However, I see them underperforming.

OK, if someone had bought on October 2008, it would be a different story. Who could have foreseen

that onslaught? The main point is, perhaps producers can not replenish their reserves and this is the reason that they underperform the gold price. So, unless someone has Dr Bubb's trading abilities, perhaps the mining sector

should be avoided.

 

 

 

 

 

Share this post


Link to post
Share on other sites
The mean price I paid for GDX is 44$, so I am still ahead after this correction.

 

It is stated that miners provide a leverage to the gold price. However, I see them underperforming.

OK, if someone had bought on October 2008, it would be a different story. Who could have foreseen

that onslaught? The main point is, perhaps producers can not replenish their reserves and this is the reason that they underperform the gold price. So, unless someone has Dr Bubb's trading abilities, perhaps the mining sector

should be avoided.

Take a look at the gyrations of tech stocks thru the Nasdaq bubble - it's not for the faint hearted I'll grant you but Im sure GDX will be way up in a years time - no idea about next week though!

Share this post


Link to post
Share on other sites

Giant Gold Nugget Last of Its Kind

 

A single gold nugget weighing more than 100 ounces will soon be auctioned. The going price is likely around $130,000. But experts say it is far more valuable as a historical object. (Jan. 21)

 

Share this post


Link to post
Share on other sites
The mean price I paid for GDX is 44$, so I am still ahead after this correction.

 

It is stated that miners provide a leverage to the gold price. However, I see them underperforming.

OK, if someone had bought on October 2008, it would be a different story. Who could have foreseen

that onslaught? The main point is, perhaps producers can not replenish their reserves and this is the reason that they underperform the gold price. So, unless someone has Dr Bubb's trading abilities, perhaps the mining sector

should be avoided.

I've maintained all along that it's best to first have a large central core position in gold... not silver, or gold stocks. You might want to own stocks over and above gold, but this should be considered speculative [remaining volatile to both the up and downside for some time]. The reason why gold is in a world of its own is because it's an alternative currency [replacing the function the Euro had] and will not fall much should general deleveraging occur/ continue. Gold is a prime form of liquidity, and a continued drive towards liquidity should see it strengthen.

 

It would be interesting to do a survey and see how many of the gold bugs actually have over 50% of their worth in gold itself.

Share this post


Link to post
Share on other sites

I've given the miners a pass for a couple of reasons:

 

1) The miner stock price is 'up', measured in dollars or pounds, but what does that really mean? Isn't the currency its measured in depreciating as well, since the underlying asset is becoming more valuable?

2) The volatility will become insane - who has the metaphorical cajones to buy and hold through those wild correction? Only those with nerves of steel.

 

I think the only way you can win this game is to trade the miners (long and short), take the 'profits' and buy physical gold and silver. Steward Thompson says something to that effect. When the whole system blows up, you will still be holding a 'claim' to metal in the ground rather than the actual thing. Stocks are still derivatives (albeit derivatives which are closer to the real uderlying thing than say CDS). Will the companies and the exchanges follow the rule of law in a crisis? Who know? If what many are predicting actually comes true then any form of paper will ultimately become worthless.

 

Personally, I would have farmland over the GDX anyday. But that's just me.

Share this post


Link to post
Share on other sites
I've given the miners a pass for a couple of reasons:

 

1) The miner stock price is 'up', measured in dollars or pounds, but what does that really mean? Isn't the currency its measured in depreciating as well, since the underlying asset is becoming more valuable?

2) The volatility will become insane - who has the metaphorical cajones to buy and hold through those wild correction? Only those with nerves of steel.

 

I think the only way you can win this game is to trade the miners (long and short), take the 'profits' and buy physical gold and silver. Steward Thompson says something to that effect. When the whole system blows up, you will still be holding a 'claim' to metal in the ground rather than the actual thing. Stocks are still derivatives (albeit derivatives which are closer to the real uderlying thing than say CDS). Will the companies and the exchanges follow the rule of law in a crisis? Who know? If what many are predicting actually comes true then any form of paper will ultimately become worthless.

 

Personally, I would have farmland over the GDX anyday. But that's just me.

Good post IMO.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×