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« Richard Russell - Gold Smash & Danger For A Major Market | Main | Silver Prices On Track To Re-Test June Lows »
Wednesday
Nov272013

Double, double toil and trouble. ‘Treasuries’ burn and ‘markets’ bubble

 

The Federal Reserve has created an economic problem worthy of a Shakespearean tragedy. On the one hand they have worked tirelessly to support the markets and prevent an economic depression while on the other hand, they have also created a problem for which is no clear solution. The bond buying program instituted by the Fed has been similar to casting economic spells over global markets, convincing them that all is well. However, deciphering their next move has been an exercise in reading economic entrails for forward guidance. You can imagine the twelve ‘witches’ of the FOMC mixing a brew of unemployment statistics, GDP forecasts, inflation expectations and shreds of economic data into a ‘witches brew’ that will determine whence tapering begins. The market is obsessed with this date and it has coloured every significant market movement since the Fed shocked market watchers and delayed ‘the taper’ after their meeting in September. Market indices have gyrated with economic data as they get added to the cauldron of economic decision making that the twelve governors stir to generate apparitions for market participants to interpret. These images have bedeviled markets in a ‘fair is foul and foul is fair’ interpretation of events. Even yesterday, a gauge of upcoming home sales fell in October for the fifth straight month, the latest sign that higher prices and borrowing costs are denting the housing rebound. While this news should be negative for the stock market, in fact it rallied, in hopes that tapering might be delayed and continued stimulus would push markets even higher. The latest housing data "are a reason for the Fed to remain cautious” about slowing the bond-buying, said Jim O'Sullivan, chief U.S. economist at High Frequency Economics. Once again market participants are left to interpret the foggy images appearing above the economic cauldron the FOMC stirs for guidance.

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In September 2011 the Gold Bugs index, the HUI stood at 630 as gold prices peaked, since then both have trended lower with the HUI losing about 65% of its value. The bottom has been called a number of times and after such a dramatic decline its difficult not to think that we are there now. However, as we all know the timing of any investment is crucial to its success and that is exactly what we are trying to do here, trying to pick advantageous entry and exit points. If you would like to know which stocks we are buying and selling please join us atStock Trader our premium investment service.

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