Thursday, June 8

This Ain't no Party...

Fleckenstein gets it right in his May 23 article on MSN:

...For now, folks may actually think that the Fed will fight inflation. So, days like last Wednesday lead to "Fed's gonna be tough" talk. Which is why metals can go down in a session when inflation fears are running on the high side.

Setup for metals' gain, stocks' pain

Nevertheless, as the vise tightens down the road -- i.e., inflation is still not under control, but the economy is clearly slowing down -- you can be sure that the Fed will opt for rationalizing inflation, in the (futile) hope of not presiding over a nasty downturn. That will be the moment in time when the metals (and foreign currencies) really go wild to the upside.
Meanwhile, I believe that the path of least resistance for equities will now be down in the short run. And when we get the next rally, I would expect it to fail, since I firmly believe that the top of this three-year-long bear-market rally has finally been seen.

Sell in May and go away. Especially during a mid-term election year. Rates around the globe are going higher; the equivalent of cutting the purity of a junkie's fix--someone out there is gonna start shaking. I wonder which hedge funds will be going belly-up this year.

We'll see how well Bernanke can dance when he is presented with the " this one is too big to fail" argument for Central Bank "intervention", i.e., print up billions of new money or credit in order to save chequed-pants multi-millionare hedge fund inbreds from taking one on the chin, and oh, by the way send the bill to Johnny blue-collar's children, so they have to drop out of college and learn "a trade" instead of attending Hops & Barley U. on the six year "undecided" plan. What a system.

Currencies markets are starting to get rocked. Bank of Korea surprised the markets and raised rates.

"With the Asian markets all slumping, recent bearish sentiment, which initially began with caution over more (possible) U.S. rate hikes, has gotten worse and worse," said Samsung Securities analyst You Sung-min. "The (BOK) rate hike was just one more on top of layers of negative factors."

South Korean banks were hit hard by the rate hike, fueling worries of a possible cooldown in South Korea's sizzling property market and concern over whether the economy is strong enough to sustain higher borrowing costs.

The losses came after stocks dropped on Wall Street Wednesday, extending investors' losses for a third straight session and pushing the Dow Jones industrial average below 11,000 for the first time since March 9.

Yeah, Central Banks around the world are tightening up, the Fed has been bumping up the Fed Funds rate for a while now claiming it will continue, and you want to be net long this market? How stupid are you?

At least wait till October. Until then, enjoy the volatility.

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