Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Can the Markets Survive Without QE3?

Stock-Markets / Financial Markets 2011 Dec 14, 2011 - 06:55 AM GMT

By: PhilStockWorld

Stock-Markets

Best Financial Markets Analysis ArticleWTF?

Do Ben Bernanke and I live on different planets?  "For a lot of people," he said during a speech at Fort Bliss, "I know it doesn’t feel like the recession ever ended."  For what people exactly, Dr. Bernanke, does it seem like it did end?  Study after study after study show that, if you are not lucky enough to be in the top 10% of our society (and certainly not a shade of Johnson’s "Great Society" anymore) then you are pretty much f*cked – and, no, there’s not a nicer way to put it.  


Bernanke seems to love the Great Depression so much he is Hell-bent on replicating it here so he can study it in greater detail.  I suppose he has some sort of academic detachment regarding the untold suffering he is causing the American people but, who can blame him?  He just got a great rate when he refinanced his $850,000 home. 

Fortunately, we had complete confidence in Bernanke’s incompetence (see yesterday’s "To QE3 or not to QE3 – That Sets Direction") and, of course, we took advantage of yet another chance to short oil futures (/CL) off the $101 and then the $100 lines on the way down.  We were HOPING (not a valid investing strategy) that we’d get some QE3 but, as I warned Members in the morning:  "If not – well, Hell hath no fury like a market disappointed." 

Clearly, as you can see from David Fry’s SPY chart – I was not overselling the point.  Bernanke and the Fed are of the opinion that 10% unemployment is within their mandate of "promoting full employment" and don’t see the need to take action?  Let’s have a little review of how good the Fed Chairman has been as a prognosticator for our economy as he enters his 7th year at the Fed:

Drivin’ that train, high on cocaine

Casey Jones you better watch your speed

Trouble ahead, trouble behind

and you know that notion just crossed my mind

Trouble with you is the trouble with me

Got two good eyes but we still don’t see

Come round the bend, you know it’s the end

The fireman screams and the engine just gleams – Grateful Dead

Scary, isn’t it?  I think those lyrics sum it up better than me ranting about what an idiot this man is.  Can our economic engine survive a Fed Chairman who is asleep at the switch?  

This economy, the whole Global Economy, in fact, has the potential to go off a cliff between now and the next Fed meeting (Jan 25th) but, rather than put the brakes on our downward spiral or at least nudge us in a different direction – Ben would rather wait until we’re falling off that cliff at 32 feet per second squared to take action – risking the possibility that it may no longer be possible to "fix" things if our downhill slide begins to gain momentum.

We didn’t wait for Ben to screw us over, fortunately – we were already deeply concerned about the Global Economy (see Monday’s "Robbing Peter to Pay Portugal") and had gone back to "Cashy and Cautious" last week.  Now that our hopes of QE3 and a Santa Rally are dashed on the rocks – we’re glad for the DXD Jan $15 at $1.25 (now $1.50) calls from Friday’s post (offset with short FCX Feb $33 puts at $1.25, now $1.45) as well as our SQQQ Jan $16/19 bull call spread at $1.50 (now in the money at $20.19 with the spread at $2 – up 33% in 2 days) and all of our offsetting put sales there (GOOG, AAPL, MSFT) were up for the day yesterday so big winners from Monday morning’s post as well as my calls to short the S&P (/ES) Futures at 1,250 (now 1,219) and the Russell (/TF) futures at 740 (now 713) with the RUT, for example, gaining $2,700 per contract on that drop!  

In Member Chat on Monday, we did pick up a long on NLY (very hedged) and an aggressive FAS $60/61 bull call spread for the White Christmas Portfolio at .55 on the assumption XLF would hold $13 through Friday.  We tested $12.50 yesterday and, if we’re not over $13 by lunch, we’ll pull those $60s (now $1.70) off the table and leave the $61s as a naked call – if those expire worthless, then it’s a $1.15 profit off the .55 net entry (209%), which is not bad for a trade we called wrong!  

SLF was another bottom fishing find (thanks Savi) and we took a chance on DMND – in case they don’t go BK.  Yesterday, we added a bearish play on NFLX at 11:52,  TLT at 1:08, a bullish trade on RIMM at 1:51 (also betting they don’t go BK, like they are priced),  

DIA $117 puts for .90 at 2:12 that we took off the table at $1.20 at 2:45 (up 33% in 35 minutes), then the DIA 12/31 $116 puts at $1 at 2:50, which we dumped for $1.20 (up 20%) followed by the 12/31 $115 puts at $1 at 3:36 which we got out even on.  That put us back to fairly balanced into the close but, if we fail to take back the 1,235 Must Hold line on the S&P this morning (doubtful) – it will be bearish bets we’re looking to add this morning.  

What’s the good news that can take us higher now?  What catalyst can we expect as Europe has done whatever it is that it did and China and Japan did their things and Ben did his thing (which is nothing) so – now what?  Now the attention turns back to the data, back to the Fundamentals and the Fundamentals are NOT sound.  Not at all.  My prior bullishness on the Fundamentals included the expectations of an injection of QE3, without new money coming in from somewhere – we can expect those Must Hold lines to begin to look more like the top off a 10% lower range.  

It’s all about the Dollar, of course but, if Europe is easing and China is easing and Japan is doing whatever they are doing – then doesn’t that make the Dollar relatively stronger and, if the Dollar is stronger, then commodities are lower and, if commodities are lower – then won’t that drag down the commodity sectors and won’t they, in turn drag down the S&P and, in turn, the Nasdaq, Dow, NYSE and Russell?  

That’s all Fundamentals are – follow the money.  Or, in this case, thanks to the Fed – the lack of it

- Phil

Click here for a free trial to Stock World Weekly.

www.philstockworld.com

Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)

© 2011 Copyright  PhilStockWorld - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Rob
14 Dec 11, 14:34
QE 3 ... the last bullet

QE3 might be the last silver bullet of the Feb. I suspect Feb won't use it till the cassh call in Europe peak during Feb or March in 2012.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in