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Freaky Friday Potpourri: Rumors Vs. Facts


The distinction between reality and hearsay speaks volumes.


The Freak that is Friday arrives in the 'Ville and there's lots to discuss as we jiggle and thrill. In the interest of time management and credible clarity, we're gonna jump right in and juggle the struggle.

First Things First…

Yesterday, Professor Lance Lewis wrote the following missive on the Buzz. We share it for the benefit of those who might have missed it:

"Note that the spread between the 3-month bill yield and the Fed funds target rate has widened to a record 166 bps this morning (assuming it closes here or lower for the week).

Since August, you will also note that such a widening of this spread into this area (i.e. - the market becomes so terrified of the system seizing up that people pile into T-bills) has tended to precede emergency Fed action as well.

Could the Fed ease tomorrow morning after the release of the jobs data? It's a distinct possibility in my view. The Fed has made it pretty clear that it is going to continue to ease in a "timely" manner and defend "the system" regardless of inflationary pressures. I for one do not doubt their resolve, but then again that's why I'm long gold and gold shares.
(Lance has a position in gld and gold shares).

  • That story was highlighted by the Wall Street Journal online, which did a nice job of summarizing the analysis in the manner in which it was offered.

  • CNBC picked up the story of an emergency ease this morning, citing a "rumor started by something called Minyanville." That isn't a fair representation of what Lance said or the lucid thought process behind it. Lance shared an opinion based on his analysis of the structural machination.

  • Offering a random conclusion without the proper context is, quite ironically, how rumors get started in the first place.

Bank to Life, Back to Reality

  • Turn those machines back on! The jobs data was punk, pointing to further slowing in the economy. Remember, employment has been the hat hanger that the anti-stagflation folks have pointed to.

  • The most deflationary thing in the history of mankind? The internet.

  • Right before the economic numbers hit, the Fed announced that it was increasing the size of the March Term Auction Facility auctions to $50 billion each to address "heightened liquidity pressures."

  • You remember these, they're the "temporary" conduits that were set up to allow banks to borrow anonymously. It's sorta like the discount window without the stigma of having to admit you need help.

  • Everyone is lamenting about the dollar devaluation. I can't shake the feeling that a grabby upside greenback will open a whole other can of worms.

  • S&P 1310, the January low and former support, is now resistance. The same can be said for DJIA 12,000, if and when. Technicals are but one of our four primary metrics but they offer a context for risk definition, one step at a time.

Meanwhile, in the Ethiopian Shim Sham…

  • Given where we are and where we're going, one of our critters is gonna pass this test with flying colors!

  • This would be a good time to review our Ten Commandments. No, not these. These!

  • Coops DeVille was right when he said yesterday that it feels like the Trading Inquisition out there.

  • JUDAS! How important are the January lows (S&P 1310, DJIA 12,000)? Hold and the successful retest camp will quickly get loud. Fold and every technician and their sister will towel toss.Count DeMoney? I was trading around Pan American (PAAS) from the short side yesterday but covered up into the close in homage to Winky Wright.

  • Fire Away! You wanna see your fellow Minyans actively engaged? Feel free to join in--that's why it's there!

Answers I Really Wanna Know…

Good luck Minyans, and let's be careful out there.


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Lance Lewis has positions in gld and gold stocks
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