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Nothing much moved today on the PM side as the market collectively held it’s breath waiting for The Bernank’s do-nothing address. That speech, in turn, resulted in a massive shrug of the shoulders after market close today.
There’s some chop back and forth and further attempts upon my person in the form of certain “Chicken-playing” PM stocks (ahem, AAU and EXK, damn you!). These stocks attempt to force me off the road by driving straight at me at 110 mph, whilst drunk on Old Crowe whiskey.
I will not be moved by such crude tactics, and I continue to beleive there will be a bounce in the metal sectors collectively. Action in the minor metals like palladium and platinum are betraying this new direction, and even copper is showing stubborn signs of staying about $4.00.
In the meantime, dollar strength is seemingly being abetted by a weak Ozzie Dollah and Canuckistanian Looney. That too simply cannot be the basis for a dollar rip, so sorry. Not for the long term at least.
So just check yesterday’s chart for tomorrow’s action, as nothing looks very different. On another note, you may want to inspect the FAS-mobile tomorrow as well, as it looks like banks may be ready to roll once again.
Best to you all.
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Oh, and QRM is right back to that original support level as well, for those who were discussing it previously.
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WTF just happened? QRM announces even more hree’s found at Strange Lake and they go over a waterfall?
If you had ZERO holdings in PMs… Would you start a position here? If so… Which? PSLV? AGQ?
GDX
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OEW Gold Update:
http://caldaro.wordpress.com/2011/06/07/gold-quick-update/
Jake, do you like to read Richard Koo ? Not sure if you respect him or not, but if you do:
excerpt from todays note:
QE2’s impact on real economy meager at best
As I discussed in a report dated 17 May, QE2 did lift stock and commodity prices via the portfolio rebalancing effect, but its impact on the real economy and housing prices was, at best, limited.
Six months into QE2, hiring growth is slowing and house price declines are widening, in a clear indication that QE2 has not delivered the Krugman/Wells effect hoped for by the White House.
And if the economy and corporate earnings do not show the kind of growth the market is expecting, there is the danger that share prices—which have risen on expectations of higher earnings—would be hit hard once investors realize current prices cannot be justified on a discounted cash flow basis.
I think this all comes as a shock to the Obama administration, which had expected to win re-election next year by boosting the economy with bold monetary accommodation. Instead, they are now forced to confront the limited efficacy of monetary policy, which was effectively their last hope.
Only remaining options: dollar devaluation and protectionism
Now that the Obama administration has gotten behind fiscal consolidation, an activist fiscal policy is no longer an option. Monetary policy, meanwhile, has been demonstrated to be ineffective under existing conditions.
The only remaining macroeconomic options for the administration are the beggar-thy-neighbor policies of dollar devaluation and protectionism, and these approaches come with their own set of problems.
To start with, the US dollar is already trading at historic lows against the yen and many other currencies, which has helped push oil prices higher. Attempts to drive the dollar down from current levels could spur panic sales of dollar bonds by foreign investors tired of exchange losses, in a repeat of the events of March 1987.
…
Obama administration underestimated power of balance sheet recession
In the end, the problems facing the Obama administration are rooted in its decision not to explain to the people that this is no ordinary recession but a balance sheet recession similar to the Great Depression.
Without that explanation, the Administration cannot make the case why the 7% effect noted above should not apply in this situation or why the fiscal stimulus delivered by Mr. Obama in 2009 was actually the right thing to do.
The Obama administration clearly underestimated the power of a balance sheet recession—although perhaps not to the extent of the Republicans—and at the same time overestimated the effectiveness of monetary policy.
US should have done more to learn from Japan
This pattern mirrors the experience of Japan in the 1990s. At the time, fiscal stimulus was decried as pork-barrel politics and was hugely unpopular, at least with the media, while there was tremendous pressure on the BOJ to ease further. For the first few years, people were unaware that they were dealing with a highly unusual balance sheet recession and assumed that if they merely administered a little more of the usual medicine—monetary accommodation—the patient would be fine.
Complicating the situation was the fact that no university inside or outside Japan was teaching students about balance sheet recessions, which result when a bubble bursts and the private sector moves to pay down debt despite zero interest rates. In that sense, it could not be helped that Japan’s response to the recession was largely trial-and-error.
But this time the US had the Japanese experience to learn from, and there are many more people—including Mr. Krugman— who understand what a balance sheet recession is.
..Obama administration needs to shift to fiscal stimulus as quickly as possible
Even if senior economic policymakers realize that fiscal stimulus is the only option left, the direction of policy cannot be changed overnight. Mr. Obama, after all, promised voters he would pursue fiscal consolidation.
But if the Democrats made a decision and argued that fiscal stimulus was needed for the time being, the Obama administration could set itself apart from the Republicans, who have staked their political careers on fiscal consolidation.
If Democrats do not have the courage to do that and instead continue to stumble along the current path, the balance sheet recession would make itself felt even more as housing prices continue to fall.
For that reason I think it is essential that the Obama administration alter its policy stance as soon as possible, for the sake of both the US economy and the global economy…
anyway, long paper but a good read if you get your hands on it..
…the only option left.
And with China also bailing out their local governments for $463 billion, or the equivalent of one and a half TARPs when adjusted for gross domestic product, I don’t see how pm’s and hopefully miners go anywhere but up.
Tell me if I’m wrong, so I can end this suffering! LOL
I don’t think you are wrong, obviously.
That doesn’t mean you won’t suffer in the interrum, however.
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Jake,
I just wanted to take a moment and say thank you for sharing your thoughts with us.
I think I speak for many in saying that your time and efforts are truly appreciated.
thanks,
Fabian
You’re most welcome.
My Mom has all your albums.
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HAha!
Dude…you’re in denial. All of your stocks are headed lower.
Ha! And all your bases are belong to us.
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David Mamet, famed author of the classic ‘Glenn Gary Glen Ross’, has a new book out about his political conversion from brain dead liberal to an open minded conservative.
“The Secret Knowledge: On the Dismantling of American Culture”
funny stuff from Book Review –
“Among his assertions: College is nothing more than “socialist camp,” NPR stands for “National Palestinian Radio” and Hollywood liberals once embraced communism “because they hadn’t invented Pilates yet.” Mamet also told the Wall Street Journal that the Toyota Prius (presumably a “liberal” car) is an “anti-chick magnet” and “ugly as a dogcatcher’s butt.”
I will be the first person in the state to be carrying around a dog-eared, post-it note flecked, annotated copy of that tome.
But not the last!
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EXK below 8. AG standing tall. Currently, I am getting AAU’d. Never say never. But, I think after I dispose of this position I am done with the miners. Extremely high volatility.
No question. Of course you just named three of the most dynamite-encased.
Next time (if there’s a next time), try some GLD, SLV, GDX, GDXJ… diversify!
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Problem solved! I sold some AAU this afternoon, now the price shall officially move up. Abe Lincoln had a better future after he picked up his tickets at the box office than I do with this infernal company. This appears to be a regular occurrence with me. Once I get disgusted with a position, I sell some, or all and the price increases. No recommendation for SLW? Wait a minute. Of course, I own it!
No, SLW is great too. Those others, however, offer some diversification from “single issue risk.”
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Hmmmm…what’s so great about stock moving lower after breaching 200 Day MA?
It’s on sale???
Or was that rhetorical?
If you bought most of it at under $5, it’s great for a long way under the 200 day.
Great is an earned accolade, and will be different for different folks.
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You’re on the same round trip ride as Moober with BOOM…perhaps your ego is too large to accept that the trade is over.
Input received and appreciated. Thank you.