Effectiveness of LTRO: Market prices up, everything else still shitty http://ftalphaville.ft.com/blog/2012/03/22/933491/ltrosophy-101/ Expectations can change on a dime and take market prices with it...
The long end of the treasury curve blowing out is probably good for gold. If you don't understand why, reading FOFOA is a good start. Let me summarize it like this: the long end blowing out with the short end staying pinned basically means a loss of confidence in the fed's ability to maintain the pin without inflating the money supply so much that long bonds have little chance of retaining purchasing power. The scenario that is devastating for gold is the opposite, where short rates are jacked up higher than long rates. I think this is nowhere in sight. It's obvious that you are assuming a frictionless market if you think you'll be able to get all the physical bullion you want when you perceive the eleventh hour. The bullion run has already begun, with Turkey being the next country in line for their bullion held by the big money centers. The front month comex gold contract briefly went into backwardation today. Bi-lateral trade agreements being signed everywhere, announcements of cashless societies, etc. Signs are everywhere. Godspeed my friend.
Re: CRM Before last earnings, you had a company trading at a ridiculous PE based purely on the hype of revenue growth. Which under GAAP lost money instead of posting a profit. Now you have it going actually negative. And stock based compensation works nicely as a motivator to your salesforce, but this is a game of musical chairs. What happens when the music stops? I'm not saying go full size on the short, since the index rise gives heavy bids under this one. But fundamentally unless those revenues crystallize into hard cash flows, this company is epic bullshit. I have stated that (credit to Paulo Santos) that CRM is simply playing accounting games, and we know what the likely end of this movie is. This post isn't saying the company is a fraud, just that stay on your toes and watch the macro drivers.
Interesting paper http://www.brookings.edu/economics/bpea/Latest-Conference/stockwatson.aspx It seems that the bottom line of this paper is that they say indirectly that a high employment to population is good because GDP growth will be faster(As people can produce more by having more workers) and a low employment to pop is bad due the opposite UR is irrelevant, its affected by demographics and other issues. Bernanke is aware of this, he even said in 2003 that a low employment to pop was a reason to keep rates low(FOMC meeting when he was Governor)
Yes I agree with this concerns. The issue is how to trade it. I have never been big on backtesting even though I have quite a bit of background in computer programming. But now I'm going to start to do that more on Excel and other programs I would try to find out whats the proper way to short these high flyers after some kind of weakness is triggered(Perhaps a decline of 10-20% in a short period) and how to take profits. But its going to take some time for me to finish this
And the E to P ratio is close to the low, has not confirmed this supposed improvement in the labor market(Improved 0.4% from its lows while the UR is off almost 2 full percentage points from the highs)
@ daal, I would advocate waiting for a pause in the index or a selloff to initiate a position like that. If you are talking data wise, look for negative econ data coming out and that the market is reacting to it. Look at what happened in the fall of last year with AMZN, CRM, GMCR, BIDU and PCLN. 4/5 last fall on earnings isn't too bad. I had an absolute killer in GMCR, added 10% to my year. Get out after the P/E contracts to a lower number that seems reasonable.
Shades of gray... were the long end of the curve to truly "blow out," the economy would be fucked. The scenario that is good for gold would be 1) long end threatens to blow out via UST dumping 2) The Fed panics and monetizes in suicidal size (supporting the bond market via $USD creation) 3) Runaway printing press activity leads to gold supernova It's the Von Mises prophecy (paraphrase): "In the end, either the economy or the currency is destroyed." The Federal Reserve would rather destroy the currency than the economy; they can exercise this option in defense of the long bond market with infinite fiat purchases if need be. But note the above scenario does not actually entail a long end blowout occurring, because the Fed would not let that happen (cost to economy too high). The dollar would be blown out, not bonds. The rising rate scenario which hurts gold is not the "blowout" one, but the one in which long rates go up enough to induce a tightening bias, without sending the Fed into panic mode. (Note too that, in this scenario, there is a window where gold could fall sharply BEFORE the Fed panics.) I find that the arguments for gold tend to be polarized toward extreme scenarios. It is true that if something "blows out" one way or another gold probably does well; but this is precisely my concern, as the real world tends more towards the middle of the bell curve than the outliers -- for extended periods of time rather -- and it is not inconceivable that gold falls into the big hole in the middle before rising later (where rates rise but do not skyrocket; global growth creeps but not leaps; systemic risk fears gradually fizzle down, and so on). If gold goes back to $1,000 before it goes to $3,000, a lot of present day bulls will be hurt badly. As for your last paragraph, I really can't get too worked up about TEOTWAWKI. I make my living in financial markets -- if the system becomes so screwed that the global financial system shuts down, mass panic over physical gold ownership etcetera, then my present way of life is toast anyway... in the true "only physical will do" scenario, access to handguns, bottled water and basic bartering and trade skills probably matter more than anything else.
A myopic focus on "relative returns" is for fund-manager types who consider losing 40% of their clients' money to be acceptable - so long as everybody else lost too, and so long as you beat the benchmark by twenty basis points. It's a tautology to say that an expected return of 5% is greater than an expected return of 2%. Having these figures does not tell you whether either asset would be a sound investment: -20% is much better than -50% but both are horrid. Absolute returns are important, the risk and "profile" of those returns are important, knowing when to remain in cash on the sidelines is important. The last ten years ought to have demonstrated this clearly. Yet Goldman, in the article I was critiquing, appears to have observed that five is greater than two, immediately jumped to the conclusion that "stocks are cheaper than they've been in a generation," and recommended that everyone therefore jump into the stock market with both feet. This is a marketing pitch, not serious analysis.
You use "we" a lot - maybe I missed it, but do you work for a trading/investment firm or something similar? Or just like the ring to it...