Friday, December 3, 2010

Weisenthal Falls In with Another Bad Crowd

Joe Weisenthal, the reformed Gold Hater, has left the Gold Haters camp, only to fall in with another bad crowd. Will this guy ever learn?

This time he is of the absurd belief that because Bernanke is printing money, interest rates have to go down. He writes:

If You Think This Is A....QE-Rally, You're Not Paying Attention
The easy think to say about the market rebound (or, relatively minor market selling) is that this is the Bernanke Put at action. Bad news = more QE = bullish for stocks!

Except, it doesn't really look like that, and the easiest way to see that is by looking at yields.

As ForexLive just pointed out, the 10-year is back at 3%!

And check out 30-year bond futures. Amazing chart.

If this were about more QE, we'd be seeing a big bond rally. Alas, we're not. This is, as we pointed out earlier, a "risk on" rally.
Well actually, Joe, you are all wet. What's going on is a combination of the start of a QE rally, combined with the money printing that has been going on as a result of the Fed re-investing cash flow from its MBS portfolio.

This will push stocks up, as it will all asset classes, except bonds. You see, Joe, assets go up because there is more money around, BUT this also means price inflation is heating up and interest rates start to carry an inflation premium, couple this with the growing debt problem at federal, state and local government levels, and it should be no surprise that stocks are going up because of Fed easing, while bonds are headed decidedly south.

As a matter of fact Joe, this was obvious to see, weeks ago. So instead of being confused, you could have actually been supplementing that meager income Blodget pays you with some cold hard trading cash.

Here's what I wrote in my EPJ Daily Alert on October 11:
Current views:

If the Fed opens monetary spigots after mid-term elections,as
expected, this should be highly inflationary for all assets,
including: the stock market, gold other commodities (both soft and

At some point, interest rates break much higher because of inflation.
This is the time to borrow and lock in rates for as long as possible.
It is NOT the time to hold long-term bonds.
On October 18, I wrote in the Alert:
Today I am adding the ProShares UltraShort 20+ Year Treasury ETF. The ProShares UltraShort 20+ Year Treasury (TBT) ETF aims to deliver
twice the inverse (negative) daily performance of the Barclays Capital
20+ Year U.S. Treasury Index. It's always tough to call a bottom in a
market (or top), but my view is that Bernanke's money printing will
back fire and that rates will head higher. I will probably add to this
position over time, especially if it moves against us short-term.
Joe, Listening to Krugman and Bernanke nonsense about deflation is only going to cause you to eventually again start a headline: Why I Was 100% Wrong...

Joe, you are hanging with the wrong crowd. The economists from the Austrian school are the only ones that understand what is going on in the economy.

1 comment:

  1. Considering Joe's embarrassingly uninformed remark regarding gold trading like a high beta stock (GLD would have the lowest beta of any S&P 500 stock were it in the S&P 500), it's now apparent that Joe doesn't like to fact check. He didn't even have to know about Austrian economics to get this one right. All he had to do was pull up a chart of the 30 yr yield from 2009 to see that the day QE1 was announced (March 18, Joe) produced a low that has not since been touched. Similar story in the 10 year, though the lows were taken out in Sep 2010. In fact bonds and notes (inverse to yield) tanked once the QE1 purchasing got started. I guess 2009 was just a "risk on" rally too, whatever that means.