Lee AdlerIt may be. Here’s what to look for, and a few mining stocks to ride along the way.
Massive Fed intervention has once again tilted the long term playing field. Evidence is increasing that we will not see the March low materially exceeded in nominal terms. This may have little meaning in terms of the future purchasing power of a dollar, but at least nominally the worst seems over. The Fed has won this round and is, for now, again in control of the stock market.
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Ever resolute, the Fed kept pumping the cash into Primary Dealer accounts. It kept at it until, as I calculated elsewhere, it had pumped in about $800 billion more than the dealers, and indeed the entire world, needed to absorb the flood of Treasury supply that was hammering it. That happened by the middle of April.
It was enough for the dealers to get back to their fun business of acquiring inventories of stocks, marking them up, triggering short squeezes, and convincing their herds of institutional sheep customers to follow the shorts and dive back into the market with whatever cash they had raised on the way down.
It worked, as we all know. Stocks have recovered around 55% of what they lost in the crash.
But the Fed has started to do the tighten up. Here’s what you need to know.
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The Fed has taken its foot off the gas pedal. We’ve been watching this for a couple of weeks now. Crunch time is almost here. Be afraid. Because the Fed doesn’t have a clue what to do next.
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Gold has pulled back after breaking out of its trend channel. That’s usually a sign of a top. Now what?
Short term cycles are due for tops and little pullbacks at least. If it doesn’t happen, it would be another sign that the long term cycles are back in up phases. But are these cycles, or just the manifestation of the power of the Fed to create the illusion of a market?
How do you trade it? With one eye on the ground and the other to the sky. Walk this way.
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The Fed’s massive bailout of Primary Dealers and its alphabet soup loan programs for all other big financial players, have now made moral hazard permanent and structural. Why worry about risk when you know that the Fed will always take you off the hook when the shit hits the fan?
How can we know how this will play out? How can we know if these loans can ever be repaid? Will they be repaid through inflation, perhaps hyperinflation? Or will the borrowers simply default if the markets and economy recover too slowly?
Then who will be on the hook for the Fed’s guarantees when the Fed must assume the losses? Who pays? Taxpayers? Depositors? Everyone, again through massive inflation?
Of course, there’s always a chance that everything turns out just fine. The world returns to normal in a few months. The economy bounces back, and all the trillions lent by the Fed gets repaid timely, with no financial price to be paid.
We don’t know, but there will be telltale signs in the weeks ahead that will give us a heads up.
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We expected the worst, and we’ve gotten it. But that does not mean that things will get better. The revenue trends had been strong. Now they’re awful, and spending is unimaginable. How can this be sustained? In this report, I’ll show you the data, and discuss how to handle what’s to come.
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I warned about it last week when the Fed’s POMO schedule first showed a reduced purchase rate. The Fed is taking its foot off the gas pedal. Here’s what that means for your stocks and bonds.
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Gold has reached trend resistance and 10-12 month cycle momentum is at the level where it peaked last year. Here’s what to expect, along with a few mining picks. Dig it!
