A wonderful day to all 1 of my readers :) It is snowing outside, which is not unusual here on the border of Canada. It snowed yesterday, then cleared, melted all the new snow, then froze hard overnight. Winter has not given up just yet. The Mergansers have arrived on the river, and that means spring is not far off, however.
Amazing what one day brings in the market. All heck broke loose yesterday after the Federal Reserve Minutes were released. What little I'm able to glean was the heads of the Fed were discussing costs and benefits of additional asset purchases. Most seem to believe that the relative strength in auto and housing indicate that lower interest rates are working. A number of them expressed concerns on how they would eventually unwind the existing stimulus, and that more stimulus would make unwinding even more difficult.
To me there was not much there, but I must remember the stock market was in a really over-bought condition. Many investors yesterday must have observed that the Federal Reserve has come to a crossroad. They are worried about what the Fed is doing, and the investors have begun to think of how to unwind all this stimulation without accelerating inflation.
As we laymen can observe, then, this was very beneficial to the dollar and a punch to the gut of the Euro.
But what about Gold? Was there a rumor on the street that a large hedge fund was being forced to liquidate its holdings? Rumors -- my old horse -- are what the market lives on. Traders on Wall Street would point out to you (if they weren't so high on something or another) that Gold and other Commodities had a "Death Cross". The price of gold fell through its 200-day moving Average and also its 50-day moving average. Believe it our not, computer program trading and pattern matching are looking just for those kinds of signals.
If you had been a member of my newsletter (and actually read it and remembered), Gold has seen the "Death Cross" before in April of 2012. Then it rallied like mad. Gold is now extremely oversold. So what will it be this time - rally or more down moves? Who knows, but look for Gold to be up today, and then build on that base for at least 2 more days.
Never forget (even though the media is not playing it up), the debt ceiling, automatic spending cuts, and all other kinds of negatives for the US are coming MARCH 1, 2013, and as far as I know there are no discussions between Congress and the White House. In the NY times this morning was an article that reported the Republicans think they are in the driver seat this time. (I'm dubious.)
So the media thinks the US (and maybe the global) economy is on the mend, and now is the time to move into stocks. What if we step back and look around? In my newsletter I recommended a way to understand the "big" picture using Economic principles that have been established since Adam Smith, father of the dismal science" stated them. Using those principles would suggest things are not rosy anywhere. Interest rates are zero and will remain there for some time, Feds have implemented 3 rounds of QE with little effect except to keep the economies nose above water. Unemployment is going in the wrong direction, housing starts just fell, and the list goes on. If the businesses were so upbeat about the US economy, why would we be seeing all this?
For most of us who cannot affect the politics or the economy, I suggest we hunker down and look for bargains. Benjamin Graham and Warren Buffet would look for VALUE.
Banks: Here is a report from Bloomberg that is worth reading. I can't help feeling as an "outsider" to banks, that banks are what really run the USA. http://www.bloomberg.com/news/2013-02-20/u-s-banks-bigger-than-gdp-as-accounting-rift-masks-risk.html The banks are not only too-big too-fail; they are too big to governed.
I'll finish a piece about Gold in a separate post as the editor formatting is messed up, and I don't know how to correct it in Google Blogger.
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