MV Weather Report: Sun Glinting on Gold, for Now
Rain or shine, we review the day's biggest stock stories.
Have you ever shot lighter fluid on a barbecue that was already lit? The result: Fireball, at least until the lighter fluid burns out. This is pretty much what the Fed did today.
In a bold move, the Fed said it's going to buy up to $300 billion in longer term Treasuries and is raising the size of programs aimed to reduce mortgage rates by $750 billion.
Bernanke threw this lighter fluid on the fire right in front of options expiration, and the market loved this news. The S&P 500 soared up to its 50 DMA and closed just off the day's highs of 794, making this rally quite possibly one of the greatest bear-market rallies in history.
Here's what Professor Fil Zucchi had to say on today's Buzz and Banter.
"The proverbial inward aimed bullet has been fired right between the eyes of the IOUs of our country: our currency. What the Federal Reserve has just deliberately done is to start what will be shown to be the mother of all protectionism movements. They've lowered the gauntlet on the rest of the world, and are openly daring other countries to fight our devaluation efforts.
"Mark my words: Cornered animals have little to lose, and they will take on our dare. Currencies worldwide have just been tossed on a path to worthlessness. The bottom line:
- 30-year bonds are a short
- Equities are probably a long in the short term
- Gold first, and probably oil later will likely start big upward runs
- There will be enough violent moves in all these asset classes to put a whole lot of people out of business
"I believe the end of this process will be the end of this meltdown from which a painfully slow but healthy and lasting recovery will ensue, but in my humble opinion if we thought things are bad right now, we ain't seen nothing yet."
What moved on this? Everything Fil talked about. For ETFs, pull up the GLD, TLT, and also look at the TBT (from the short side).
Gold really squeezed higher (as stated by Fil) on the day. Agnico Eagle Mines (AEM), Goldcorp (GG), Royal Gold (RGLD) and many others all rallied huge. These are your plays if you believe in what the Fed is doing.
Is the bear market over? Will we see a rally into the summer? Not so fast, my friend. Here's what Professor Kevin Depew had to say on the Buzz.
"Just wanted to drop in a quick note about the Fed decision to purchase Treasuries. It is hoped by the Fed and the market, as evidenced by the jump in stocks, that the decision to purchase Treasuries 'help improve conditions in private credit markets.'
"But it won't. What it has done is punished government bond bears and injected some additional volatility into equities ahead of expiration. At the end of the day, all that is really taking place is the issuance of more debt to make up for the debt that is being transferred away from people who don't want it anymore."
I'm exhausted; I can't believe it's only Wednesday. Remember to fill out your bracket for Minyan March Madness - the tourney starts tomorrow!
Have a great night, Minyans.
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