Armageddon? Maybe Next Week.
August 21, 2008
John Jansen submits:
Prices of Treasury coupon securities retreated today as the financial Armageddon which some had awaited anxiously has been deferred for now. The rollicking trade of the last several days has yielded to something a little more placid and pacific. Against that background, yields on benchmark Treasury debt increased across the curve. The yield on the benchmark 2 year note has climbed 8 basis points to 2.33 percent. The yield on the 5 year note has climbed 6 basis points to 3.07 percent. The yield on the benchmark 10 year note has increased by 4 basis points to 3.84 percent and the yield on the Long Bond has climbed 3 basis points to 4.47 percent.
The 2year/10 year spread has narrowed 4 basis points to 151 basis points.
Hedge Fund Manager’s Notebook: Blood on the Streets - Buy Russia
August 21, 2008
1) Crude (USO) spiked $10 to $122 when it realized that 1% of the world’s production passes through a pipeline in Georgia where the Russian invasion shows no sign of ending soon. Tropical storm Fay also brought fears of a Gulf hurricane back to the surface. Panic buying spread across a wide range of commodities contracts, from rice to gold to natural gas.
2) The tiny island nation of Singapore, which has never won a medal in the Olympics, has offered to pay $735,000 to anyone who brings home the gold. Malaysia is offering $300,000, Greece $220,000, and the Philippines $200,000. The US pays a relatively chintzy $25,000 to its medal winners. NBC thought it died and went to heaven when it rained during the women’s volleyball gold medal final. Suddenly it became an Olympic wet T-shirt contest.
Hedge Fund Manager’s Notebook: Blood on the Streets - Buy Russia
Clarifying the M3 Contraction
August 21, 2008
Michael Shedlock submits:
Many have been writing asking how the chart and commentary in M3 Contraction - The Future Is Now can possibly be correct. Here is the chart and a snip of text once again for convenience. The key sentence below is in bold.
The Telegraph is reporting Sharp US money supply contraction points to Wall Street crunch ahead.
The Inconvenient Truth of the Slowing U.S. Economy
August 21, 2008
The inconvenient truth of the U.S. economy has created one of the best buying opportunities for gold and silver bullion and associated stocks of this entire bull run right now. Anyone that believes that this U.S. dollar rally is sustainable will be in for a huge shock in the coming year. Sure, like many of us who still believe the current bull in gold and silver is intact despite the shocking recent selloff, the steepness of the sell off was still surprising to most of us. Once the all important $850 resistance line for gold was broken, I believed that $825 or so would mark the bottom of this current correction, but gold continued to fall further, shockingly breaching the $800 barrier. In fact, its monumental decline has spurred major media outlets to report the end of the gold bull and commodities bull. I am going to dispute that because certain behavior I track at the largest financial institutions in the world tell me that gold and silver’s downside has now become extremely limited and that a strong rally is now on the horizon.
Many people believe that it’s a sucker’s bet to try to call the bottom of a correction just as it is to try to predict how high prices will rise during a rally. And for the most part, calling a bottom is still impossible. Still, there are undeniably positive developments in the gold and silver bullion markets that happened a week ago. I’ll need to see confirmation of this behavior over the next couple of weeks to know for sure, but as odd as it may seem to call for the end of declines now with pessimism at an all time high, the pieces of the puzzle are in place for gold and silver now, as of August 18th, to rally strongly from this point forward until the end of the year.
The Inconvenient Truth of the Slowing U.S. Economy
Today’s Action: Crude Crushes the Dollar; Financials Threaten
August 21, 2008
Kathy Lien submits:
Oil prices are above $120 a barrel on geopolitical tensions and fears that Tropical Storm Fay will make landfall for the third time, which is an extremely rare occurrence.
The correlation between crude prices and the US Dollar has been greater than 70 percent since the beginning of the year. This correlation is evident in the following chart of oil prices and the USD/EUR. The sharp drop in crude prices single handedly triggered the sharp dollar rally between July and mid August. Now that oil prices are creeping higher once again, it would only make sense to see the US dollar slip as well.
Today’s Action: Crude Crushes the Dollar; Financials Threaten
Thursday Options Update: XLF, USO, DNDN, RDC, FL, CRM, SKS
August 21, 2008
Rebecca Engmann Darst contributed to this report.
Financial Select Sector SPDR (XLF) – Shares in the Financial Select Sector SPDR read 1.7% lower at $19.98 at present. With just shy of 200,000 lots trading over the noon hour, we’re observing traders take large-sized positions in the front month that don’t necessarily align seamlessly with the unmitigated downside we’re seeing in the underlying share price. One trader appears to have sold a September put spread between the 17 and 19 strikes for a 49-cent credit, wagering on shares remaining above that upper strike by September expiration. We also saw evidence of a trader selling the 18/23 strangle in a 5500-lot position that carries with it a credit of 66, setting clear foul lines for the share price over the coming month that this trader doesn’t believe the fund will violate.
Thursday Options Update: XLF, USO, DNDN, RDC, FL, CRM, SKS
Home Prices Have Stopped Falling: The Statistics Are Skewed
August 21, 2008
Tim Plaehn submits:
This excerpt from a response to the Sacramento Bee real estate blog gives me doubts concerning the “accuracy” of the median price data of the current crop of existing home sales. If you are a regular reader here you know I have been tracking the Sacramento area real estate market for several months. If not, use my real estate category for background.
The Sacramento market has been surging in home sales for the last 4 months with year-over-year and month-over-month gains for each of those months. The sales gains have been on the back of bank owned properties, making up to close to 70% of the existing home sales. During this same time frame the median sales price has continued lower at 4% to 5% per month and now sits about 30% lower than a year earlier. The opinion stated below leads me to believe the “real” price decrease is much less than the published data.
Home Prices Have Stopped Falling: The Statistics Are Skewed
UUP: Bullish Dollar ETF Captures Long-Term Momentum
August 21, 2008
Don Dion submits:
After suffering a long-term slump, the dollar rose more than 8% this past month in relation to the euro, leaving investors wondering how to participate in the upswing. Currency investing has always been a volatile and risky arena—and ETF issuers have released a slew of ETFs in the past two years that allow investors exposure to different currencies. In 2006, PowerShares launched two alternatives to direct currency futures investment in the U.S. dollar: PowerShares DB US Dollar Index Bearish (UDN) and PowerShares DB US Dollar Index Bullish (UUP).
UDN benefited from the dollar decline earlier this year—rising more than 7% from January 2 to March 19. In the last month, however, the dollar—and subsequently UUP—has experienced a sudden comeback. While the dollar index wavered Monday only to finish the day unchanged, the question now is: Is the rally over, or does UUP still have the potential to continue its upswing? The recent moves in both UUP and UDN have bolstered the funds on our Currency Momentum Table and relative to equity funds overall. UDN shifted from the 17th position on July 9 to the 10th position on August 20, while UUP moved from the 29th to the 9th spot for the same period.
UUP: Bullish Dollar ETF Captures Long-Term Momentum
Oil’s Jump Pushes Dollar Down
August 21, 2008
Grace Cheng submits:
Thursday’s picture of the forex markets is a different one from the day before. The US dollar had rebounded yesterday against major currencies such as the Euro, Swiss franc, Japanese yen and the British pound after a fall Tuesday, but then with the media’s crowded coverage of the soon-to-be-worthless mortgage giants Freddie Mac (FRE) and Fannie Mae (FNM), and the rebound of oil prices Thursday, bullish USD sentiment faded and downside stops were triggered when forex trading entered the US trading session.
EUR/USD rose at least 150 pips from a low of 1.4740 to around 1.4900, and Euro bulls may aim for 1.4950-60. A decisive break above 1.5000 could see the currency pair target 1.5050. As for USD/CHF, it fell by the largest amount (at least 140 pips) since a month ago. Its nearest support is around 1.0820-30. Meanwhile, the British pound is having the luck of a better-than-expected UK retail sales data on its side, and it gained at least 170 pips from1.8610 to 1.8785. USD/JPY fell to a two-week low of 108.10 as traders took the opportunity to sell the carry pair in the environment of risk avoidance.
Seven High-Priced Stock Values
August 21, 2008
Stockerblog submits:
Everyone is looking for a low share price bargain. But what about the high priced shares? There are plenty of great stocks, besides Warren Buffett’s Berkshire Hathaway Inc. (BRK.A)(BRK.B), that sell for over $100 a share.
Here are some stocks, all trading in excess of $100 a share, that have P/E ratios less than 20, PEG ratios less than 1, market caps above $15 billion, and all but one pay a dividend.
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