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ES and the Great POMO Rally
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ES and the Great POMO Rally

  #91 (permalink)
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QE market pumping


Private Banker View Post

1.- The Fed is and has always successfully created and popped asset bubbles. They are in it for themselves at the end of the day. We can currently see this with the devaluation of the USD. Sure the Fed can throw everything they have (our tax dollars) at keeping stocks up but the fact that stocks are still rising is just a distraction to our loss of purchasing power. ..

2. ...Who cares if the stocks are going up when the value of the currency in which it's denominated in is losing value.

You make a good point. I think the stocks rising and capital not being used to create new business and new jobs shows that QE1 and QE2 has pumped money into the market. The Fed creates more liquidity and with the market is moving up (+11%? on the year and 20%? since Aug ) the new money flows to best return and the best return is paper assets not new businesses. It shows the failure of QE if QE was supposed to create jobs. It shows the success of QE if it was the "bankers trust" aka Creature of Jeykle Island =the Fed to help its friends (big banks) to big profits.

re 2. So the danger you are highlighting is that to foreign investors it is the after currency exchange return on investment, relative to other foreign markets, that they are interest concerned with?

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  #92 (permalink)
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pause for breather - talking numbers

I watched a video clip (second clip in) speaking of:
in the last 10 yrs Jan has been the 3rd worst month
Jan after a strong fourth quarter is usually weak
the VIX greater than 100% usually proceeds a correction.

For someone who watches the clip could you explain to me what the VIX percentage means ?

thanks!

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  #93 (permalink)
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aquarian1 View Post
re 2. So the danger you are highlighting is that to foreign investors it is the after currency exchange return on investment, relative to other foreign markets, that they are interest concerned with?

Thanks! My point here is referencing the loss of purchasing power whether it be domestic or foreign investors from the devaluation of the currency in which that market is denominated in plus inflation in food and energy, etc. I was particularly referencing Zimbabwe here as an extreme example. Their stock market went straight up in 2007 while their currency became more worthless than monopoly money.

Cheers,
PB

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  #94 (permalink)
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Private Banker View Post
Thanks! My point here is referencing the loss of purchasing power whether it be domestic or foreign investors from the devaluation of the currency in which that market is denominated in plus inflation in food and energy, etc. I was particularly referencing Zimbabwe here as an extreme example. Their stock market went straight up in 2007 while their currency became more worthless than monopoly money.

Cheers,
PB


IS QE2 THE ROAD TO ZIMBABWE-STYLE HYPERINFLATION? NOT LIKELY

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  #95 (permalink)
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aquarian1 View Post
I watched a video clip (second clip in) speaking of:
in the last 10 yrs Jan has been the 3rd worst month
Jan after a strong fourth quarter is usually weak
the VIX greater than 100% usually proceeds a correction.

For someone who watches the clip could you explain to me what the VIX percentage means ?

thanks!

S&P 500 Index 20-Day Historical Volatility Hits 39-Year Low - Seeking Alpha

http://www.marketwatch.com/story/january-effect-will-be-nitro-fueled-2011-01-03

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  #96 (permalink)
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plumbers tale

Hi Everyone!

I had a late start this morning (too tired to get up with the 3:30am alarm) and knew the plumber would be coming by at 9am to fix the motor on the hot water radiator.

As he (say Don) fixed it we talked of stocks. Don had been investing since he left high school and started plumbing 11 yrs ago, he is 28 now. He had been in mutual funds. A couple of years ago he moved into stocks. He bought AIG at $16 and Ford at $2 in the crash.

"In the crash, I bought a whole bunch of big companies. I figured a few would survive. I now have more money than most 28 year-olds I know. I plan to retire at 40."

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aquarian1 View Post
Hi Everyone!

I had a late start this morning (too tired to get up with the 3:30am alarm) and knew the plumber would be coming by at 9am to fix the motor on the hot water radiator.

As he (say Don) fixed it we talked of stocks. Don had been investing since he left high school and started plumbing 11 yrs ago, he is 28 now. He had been in mutual funds. A couple of years ago he moved into stocks. He bought AIG at $16 and Ford at $2 in the crash.

"In the crash, I bought a whole bunch of big companies. I figured a few would survive. I now have more money than most 28 year-olds I know. I plan to retire at 40."

That's a great story! They say great wealth is made in concentrated positions whether it be something like what the plumber did or someone that starts a company and is successful or they are bought out and receive a great windfall of cash or stock.

The trick for many though is keeping it. And what I mean by that is not just spending it all but keeping that same level of "wealth" while not losing purchasing power from inflation, etc. I like hearing stories like that though. Very cool!

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That was an interesting article. Thanks for sharing that. I sure hope we don't end up like Zimbabwe but by me referencing that was merely an extreme situation. I do however, wonder where some of the people mentioned in that article were arriving with their information. I'm asking this out of pure curiosity and not calling anyone out on it of course.

Just an example:

"No, says Cullen Roche, because swapping dollars for bonds does not change the size of the money supply. A dollar bill and a dollar bond are essentially the same thing. One bears interest and is a little less liquid than the other, but both are obligations good for a dollar’s worth of goods or services in the economy. If the bondholders had wanted cash, they could have cashed out the bonds themselves. They don’t have any more money to spend, or any more incentive to spend it, when they’ve been cashed out by the government than when they were holding bonds."

Not sure where Cullen Roche is getting this from but the three basic ways the Fed influences the Money Supply are the following:

1. Most important to my point here, to increase money supply, the Fed buys US Treasuries and other US Gov related securities giving the seller cash and adding money to the economy. If you follow POMO, you will see they are doing precisely that and are now buying bonds that have only been in issuance for a few weeks at most. If the Fed wanted to reduce money supply, they would be selling their bond inventory taking cash out of the economy.
2. The Fed can change money supply by changing the Reserve Requirements for Banks.
3. They can lower and increase short-term interest rates.

But at the end of the day, we (the US) would really need to screw up to get in a situation like Zimbabwe's. As I mentioned before, the US debt ceiling situation will be interesting to watch.

Best,
PB

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ES and the Great POMO Rally-bonds.jpg   ES and the Great POMO Rally-mzm.png   ES and the Great POMO Rally-m2.png   ES and the Great POMO Rally-usd.jpg  
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  #99 (permalink)
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Vix Spike on Friday

Hi Tiger,

I've visited the links you posted.
(Perhaps you didn't watch the video(?) as your links are in contrast to the video.)

I rewatched it and I think I have my answer now, so thanks.
I posted a summary.

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  #100 (permalink)
The fun is in the numbers
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Private Banker View Post

Not sure where Cullen Roche is getting this from but the three basic ways the Fed influences the Money Supply are the following:

1. Most important to my point here, to increase money supply, the Fed buys US Treasuries and other US Gov related securities giving the seller cash and adding money to the economy. If you follow POMO, you will see they are doing precisely that and are now buying bonds that have only been in issuance for a few weeks at most. If the Fed wanted to reduce money supply, they would be selling their bond inventory taking cash out of the economy.
...

Exactly!
Buying bonds increases the money supply and selling bonds decreases it. (Buying/selling net of maturing issues).
  • thought of like a sponge (=bonds) you throw it out(=sell more) and soak up water (= cash)
  • you take it in sponge (=bonds) and squeeze out the water (=buy more) and pour out the water (= cash)

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