Peter Dag & Friends

3/15/11

Money talks

It's another day for the BOJ, which more than anything is hell bent on preventing a rerun of last night's tumble in the futures to a 7 handle. The solution: add another several trillion into money markets. Following Monday's ¥15 trillion plunge protection deposit, and yesterday's ¥8 trillion, just announced was the first tranche for tonight, which amounted to ¥3.5 trillion. And so the total involve to prevent the market from plunging a more 1,000 points is now ¥26.5 trillion, or $325 billion.(Source: Zero hedge)

Money printing by central banks is behind all major bull markets.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked second best gold timer by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

Disclaimer.The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

On commodities and bonds

March 15 (Bloomberg) -- U.S. stocks escaped the brunt of a global selloff that sent Tokyo shares to the worst two-day drop since 1987, paring losses as Japanese officials made progress stabilizing damaged nuclear reactors and the Federal Reserve said the economy is improving. Commodities slid and bonds rose.

Interesting. But not a new relationship for the readers of this blog.

Thought of the day.

March 15 (Bloomberg) -- Commodities fell for a fourth day, led by a 3.3 percent slide in crude oil, as Japan’s biggest earthquake and nuclear crisis spurred concern that demand for raw materials, including some energy products, will shrink.

What is happening around the world is incredible. Financial crises in the US and Europe, unrest in the Middle East of unprecedented proportions, earthquakes and nuclear concerns in Japan, the markets sliding, bonds strong.

Are all these events part of a huge "black swan"?

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked second best gold timer by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

Global markets are sliding. But ...

My previous "Technical patterns" posts showed the usually persistent relationship between the S&P 500, LQD, and JNK.

Today all markets are sliding, My subscribers were warned of a market correction to start in February. LQD, however, is up today. This is not surprising if you read my previous posts.

LQD, high grade bonds, seems to be an excellent hedge and a great instrument to minimize market volatility.

Is Bill Gross bearish on bonds?

3/14/11

Should we listen to him?

(Bloomberg) -- The money manager Laszlo Birinyi who picked the global stock market bottom says now is no time to sell as the biggest equity rally since 1955 starts its third year.

There are too many crises around the world and too many central banks printing money. He may be right.

Time will tell, of course.

Treasuries Price Gauge Falls

March 14 (Bloomberg) -- Since reaching a 10-month high in December, a bond market measure of inflation expectations the Fed uses to help determine monetary policy has declined to 2.97 percent from 3.28 percent. The five-year five-year forward breakeven rate projects what the rate of consumer price increases may be beginning in 2016, smoothing blips in inflation expectations from swings in oil prices and other temporary events.

Is the price of crude oil and the action of commodities telling us the economy may be slowing down? It is too early to tell. But it is somethng to watch closely.

3/13/11

Thought of the day

March 14 (Bloomberg) -- The Bank of Japan poured a record 12 trillion yen ($146 billion) into the world’s third-biggest economy today as the strongest earthquake in the nation’s history triggered a plunge in stocks and surge in credit risk.

Major crises of any type are usually a great buy opportunity because of the huge infusion of liquidity by central banks. See what happened recently in the US, Europe, and now Japan.

3/12/11

Survival makes people believe in the redistribution of income..

The more government taxes, regulates and spends to redistribute resources around and through the welfare-state daisy chain, the less society produces and the more citizens are dissatisfied with their plight in life. Personal preferences are displaced by irrational collective preferences, which pretend to serve the greater good.

Caught in the throes of its redistributive delirium, the welfare state redistributes more and more of less and less until driven to its ultimate lunacy, it leaves everyone sharing equally in the misery it creates. (For the complete article in Forbes click here)

I saw redistribution of income in Italy. The end result is an oligarchic social model with the government being the puppet of few power groups and a sluggish economy.

Unfortunately no one knows the answer to the issue of social fairness. The rich will always be rich. The poor will always be poor.

The only solution is a highly educated society. Unfortunately only the rich can afford one. This is the reason they will always be rich.

Business cycles and feedback

The idea is that things cannot be good or bad forever.

For instance, a weak economy forces unemployment to rise. But business costs are also declining during such times. Margins improve (feedback) and business eventually feels more comfortable in hiring and expanding production.

The same concept applies when the economy is strong as it is now. But business costs rise (commodities, wages, interest rates) squeezing margins (feedback). Business become more cautious and economic activity declines.

Economic feedback is what keeps the economy from growing too rapidly or contracting too severely -- unless governments intervene with unrealistic regulations creating market distortions. But eventually the business cycle reasserts itself because of the powerful economic feedback forces.

3/11/11

Our best wishes to a great nation

March 11 (Bloomberg) -- Prime Minister Naoto Kan mobilized Japan’s Self-Defense Forces and the central bank pledged to ensure financial stability after a magnitude 8.9 earthquake struck off the coast of Sendai, a city of 1 million, causing damage across the east coast of Japan.

The impact on the financial markets of this huge disaster?

Stocks weak. Commodities weak. And if commodities are weak business cycle tendencies suggest a firm bond market.