Tuesday, August 3, 2010

It’s Time to Revisit the TBT

by Madhedgefundtrader at Zerohedge.com

Shorting the world’s most overvalued asset, the 30 year US Treasury bond, has got to be the big trade from here. The relentless whirring of the printing presses is so loud that they keep me awake at night, even though, according to Mapquest, I live 2,804.08 miles away. What will be unique with this meltdown is that it will be the first collapse in history of a bond market in a non-inflationary environment.

It is not soaring consumer prices that will execute the coup de grace to the long bond. It will be the sheer volume of issuance. The Feds have to sell nearly $2.5 trillion of debt to cover a massive budget deficit and refund maturing paper, easily the largest cash call in history. Bring in a double dip recession and a second, larger stimulus package, and those numbers ratchet up considerably. (more)

Wall St climbs to 10-week high on energy

(Reuters) - U.S. stocks closed at their highest level in 10 weeks on Monday and the S&P 500 pierced key technical levels as a weaker U.S. dollar lifted the energy and raw materials sectors.

Strong results in Europe from BNP Paribas SA (BNPP.PA) and HSBC Plc (HSBA.L)(HBC.N) added to the upbeat tone and lifted U.S. bank stocks. JPMorgan Chase & Co (JPM.N) rose 3.4 percent to $41.64 and the KBW Bank index .BKX gained 3.2 percent.

The falling greenback set off a 3 percent jump in crude prices, which, coupled with BP's (BP.L)(BP.N) attempt to permanently cap its Macondo well in the Gulf of Mexico, sent energy shares soaring.

Macondo-linked companies rallied, with Transocean Ltd (RIGN.VX)(RIG.N) up 9.6 percent to $50.68. The Philadelphia exchange oil services sector index .OSX climbed 4.5 percent. (more)

Reasons Behind the Market's Recent Revival

by Donald Luskin

In my July 2 column, I said it was time to start buying stocks again. The bottom in stocks turned out to be that very day, and the S&P 500 now stands about 8% higher.There are a lot of reasons. Some I expected -- and one comes as a beautiful surprise.

The centerpiece of my buy recommendation was the improvement in the debt situation in Europe. As July has played out, it's only gotten better, with European banking regulators having completed stress tests of 91 European banks, and only seven of them failing.

I've also been saying for several months that once the oil spill in the Gulf of Mexico was brought under control, stocks would rise because a major psychological negative would have been removed. It looks like BP (BP: 39.42, +0.95, +2.46%) finally has a lid on the monster, and it seems to me that bleak mood of the last few months has started to brighten.

Here's the good news I never expected. Are you sitting down? (more)

Wall Street opens August with a big-time rally

NEW YORK — The stock market began August with a huge rally after reports from around the world revived investors' faith in the global recovery.

The Dow Jones industrial average rose 208 points Monday. All the major stock indexes rose about 2 percent.

The first day of the month brought a stream of news that reassured investors who have worried about a slowing of economic growth in the U.S., China and Europe. Manufacturing was a common thread:

  • The Institute for Supply Management's index of U.S. manufacturing activity during July was better than the market expected. Traders were pleased because the report still showed that manufacturing is growing. (more)

Goldman, Others Bullish on Euro, Predict Big Rise

By: Dan Weil The euro has gained more than 9 percent against the dollar since hitting a four-year low of $1.1877 in June, and many experts say the move will continue.

That includes Goldman Sachs. It predicts the euro will rise to $1.35 within six months and $1.38 within a year, Bloomberg reports. The euro recently stood at $1.31.

Just about a month ago, Goldman had predicted the euro would keep slumping to a seven-year low against the dollar.

But economic data over the last few weeks showing weakness in the United States and strength in Europe have created a change in sentiment.

“Weaker U.S. growth, reasonably solid euro-zone macro data and less political-fiscal disruptions than feared have been a feature of the past few weeks,” Goldman analysts wrote in a report obtained by Bloomberg. (more)

Successful Investing in China Despite the Risks

Investing always involves a kind of leap of faith. Investors have to believe that the numbers they are looking at are real. They have to believe that the financial statements reasonably reflect reality. Without that trust, there is no point in going further. The investor is like a cook unsure of the safety of his ingredients.

This is why things like auditors and listing requirements and boards of directors are so important. This is why due diligence is important: asking questions, talking to people on the ground. They give some assurance to investors that what they see is real and not a fraud.

Sometimes the lines can be very fuzzy. And sometimes the taint of fraud dogs a market, making all the stocks of that market cheap, whether they are fraudulent or not. Such a market is also very susceptible to rumor.

I think the market for the U.S.-listed China-based companies has that taint. That explains the very cheap multiples that many such companies trade for. I’m talking about price-to-earnings ratios of 5–8 times for companies growing 20–30% a year. (more)


US Treasury Running on Fumes: The Obama regime has made War the Business of America

by Paul Craig Roberts
The White House is screaming like a stuck pig. WikiLeaks’ release of the Afghan War Documents "puts the lives of our soldiers and our coalition partners at risk."

What nonsense. Obama’s war puts the lives of American soldiers at risk, and the craven puppet state behavior of "our partners" in serving as US mercenaries is what puts their troops at risk.

Keep in mind that it was someone in the US military that leaked the documents to WikiLeaks. This means that there is a spark of rebellion within the Empire itself.

And rightly so. The leaked documents show that the US has committed numerous war crimes and that the US government and military have lied through their teeth in order to cover up the failure of their policies. These are the revelations that Washington wants to keep secret. (more)

Major markets (Dow, Gold, Oil and more) analysis – August 2010

by Desihedge at Zerohedge.com

What a rally, the RISK is ON – I got two words: SHORT SQUEEZE! As mentioned in previous June analysis that a close above 10288 on Dow will open room for further rally. There is still a 2% to 5% more room for risk to go up, before stopping for a breath and then to reverse. AUD has recently shown very strong correlation to equity markets and it did not stop at its 200DMA to take a breath, just goes to show how strong the squeeze has been on DJI, AUD, SPX, you name the risk and it has been rallying……

Alright, enough of narrative, lets get to the charts. (more)

Stock Market Technical Analysis for 8/2/10

Hourly Action In Gold From Trader Dan

courtesy of www.jsmineset.com

Chart of the Day