A Nuance, If I May

Bernanke laid out very specific conditions in which he would engage in further easing. That he is planning QE3 is not indicative of him implementing QE3.

Bidding up equity and commodity prices here in anticipation of “the punchbowl” is most unwise.

Bernanke wants inflation and a weaker dollar to spur exports. Recently he received both, with commodity and equity prices skyrocketing and the trade deficit (not the last report, the one before that) closing significantly.

But he cannot engage in further easing while commodity prices are so high. To do so would be counterproductive, destroying businesses most especially the small variety.

His easing is contingent on deflation being present.

In summary friends, if you want to see QE3, I must win first.

They said they’d pass austerity. They SAID.

That’s like a promise…

I’m sitting put.

I had high hopes for MGM, particularly after they raised $1.4 billion in their IPO of the Macau properties. However, I cannot risk another slowdown with that company. The $1.4 billion, if accompanied by a slowdown, is insufficient to get the group through 2013.

Their revenue is too precious, given their repayment schedule.

I have held that position, almost uninterrupted, in some form since the $9 range. But it was time to let it go. If this whole thing blows over, I will consider repurchasing shares. But I need to see where things are going first.

I also scaled back BG, as it was far too heavy in my portfolio.

My cash position is now 30%, before reserves from short sales. I would guess I’m roughly 50/50 long to short.

Let me see here. We got to witness bond yields collapse again today, in spite of a looming budget crisis in Congress and the potential for ratings downgrades.

Just why did those yields go down? Because of one sentence representing an ancient rule of thumb.

Yields go with the market.

Look you simians, try to wrap your heads around this. It is totally possible that the market collapses and yields blow out. Especially if the market collapses because treasuries collapse.

It is completely unacceptable to me that treasuries are trading in a perfectly normal curve with virtually no premium attached given just a three week deadline for two ideologically driven groups of zealots to make a massive and complicated deal.

If you are so scared of equities, why not just go to cash and forgo lending your money to an entity with $14T of debt. Is the prospect of inflation really so terrible that you can’t bring yourself to question such nonsensical dogma?

I decided I would pair back my hedging a little after all, just in case we get a good bounce. Being overweight ERX to UCO, and having added to the trade for $79.84 last Thursday, I covered those shares today for $72.68 apiece.

Still bearish on oil and energy, going forward.

I amused myself in the first fifteen seconds or so of open trading, watching ERX bomb a few hundredths of a percent per second as backed up trades came through the lines. I’ll cover some of the ERX I added last week in the next day or so, just to keep balance between ERX and UCO. UCO is a much smaller position, but I’m not convinced that makes sense. I’m bearish on both oil and energy, but lower oil can help energy companies, so there’s some give and take there to be considered.

A peculiarity found its way onto my desk this weekend. As I sat in the 9th floor, working diligently on the backed up paperwork that had been gaping at me for the last week from its place in the corner, I came across a bit of mail sent from a certain major bank that is overseeing a certain, smaller account that I have.

The offer was simple; if I could raise the amount of money in this particular account to $10,000 and leave it there for an extended period of 90 days, they would deposit $100 into said account.

Most interested, I quickly did some back of the envelop math and realized that such an offer annualized to paying a little over 4%.

From this oddity I am convinced of three things:

1. The value of money is much higher than federal interest rates suggest, obviously, and so this offer is in support of my stronger dollar thesis.
2. The major banks are concerned enough about liquidity to offer a fairer price on deposits over the next 90 days.
3. Other preferred sources of financing may not be sufficient to cover all the bank’s needs, hence why they are scrounging around looking for shit ass deposits.

This could have something to do with the Federal Reserve’s latest ruling on minimum finance requirements; or the larger international regulations that were crafted. Unfortunately, it could also have to do with an overheating China, slowing U.S. and Europe on fire.

I think the end of summer is shaping up to be a most fascinating experience.