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Old 06-20-2013, 01:30 PM  
petegz28 petegz28 is offline
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Is the Bernanke-Bubble starting to burst?

http://www.cnbc.com/id/100831610



Signs the Fed could pull back on its easy money policies sent the dollar higher and interest rates rose to a two-year high, jarring stocks and other risk markets around the globe.


Major Asian stock markets were down about 2 percent and Europe's biggest markets were down 3 percent or more, while U.S. stocks dropped more than 2 percent in afternoon trading. Gold had one of the more violent reactions, falling under $1,300 per ounce, or more than 6 percent, after breaking the key $1,321 level. Gold settled at $1296 per troy ounce.



Selling picked up speed in afternoon trading after the S&P 500 fell through 1598, the bottom of a support range, and a move that puts the next downside target closer to 1,575, traders said.

"It's freaking, crazy now," said one stock trader in the 3 p.m. ET hour as the Dow sunk more than 350 points. "Even defensive sectors are getting smoked. The super broad-based sell off between commodities, bonds, equities - I wouldn't say it's panic, but we've seen aggressive selling on the lows."

Some emerging markets were much harder hit, like Brazil, down almost 4 percent to a four-year low, and Turkey down 5 percent. Emerging market currencies were also slammed from India, to South Africa and Mexico.


(Read More: Global Markets Feel the Sting of Fed's Tapering)


The 10-year Treasury yield rose as high as 2.47 percent, above a range it has been trapped in since August 2011. Yields were at about 2.42 percent in afternoon trading, but a close above 2.4 percent would be key to some technicians and could mean rates continue to move higher.

"I do think this is the beginning of a long-term trend in rising rates," said Ward McCarthy, Jefferies chief financial economist. "But I don't think this is the beginning of a longer-term trend of a decline in stocks. I think stocks will stabilize. Eventually, you're going to start to see a rotation out of fixed income into stocks, and stocks will rise."

Already, investors have been dumping bonds, since yields began moving higher in early May. ICI said there were more than $13 billion in outflows from bond funds last week alone.

"What we've seen now, and my concern is what we've seen now and my concern today is this negative feedback loop between mortgages and investment grade credit and Treasurys," said John Briggs, senior Treasury strategist at RBS. He said some of the selling in Treasurys came as traders hedged against a volatile mortgage market, which saw spreads initially widen, then narrow, then even widen again.

"My guess is this calms down … and then the importance of the economic data releases will become quite profound. As we sit today, I think the Fed's probably going to continue $85 billion per month through October and in October decide, they'll start the wind down in November," said McCarthy. Markets shrugged off improved data from the Philadelphia Fed and better home sales Thursday.

"Rates are going to be higher over time. I think we'll be looking at 3 percent towards the end of the year. Right now, we're sort of going through an initial sea change," McCarthy said. He said Bernanke first made it very clear the Fed could pull back on easing May 22 when he spoke to Congress.

"At least some folks seemed to hold out hope that Bernanke could stick the genie back in the bottle. No. 1, he could not do it, and No. 2, he didn't want to."

Fed Chairman Ben Bernanke Wednesday confirmed what markets had been expecting to hear—that the Fed could begin to taper back its $85 billion in monthly bond purchases before the end of the year if the economy improves enough.

He also said the purchases of Treasury and mortgage bonds could be completed by the middle of next year, but once it stops, the Fed would still be holding about $4 trillion in securities on its balance sheet.

"We're not talking about a tightening of monetary policy. The description he used was as the car accelerates, it's like taking the foot off the gas pedal, not braking," said Jim Steel, HSBC chief commodities analyst.

"If yields cease rising and the dollar flattens out that would signal a recovery in gold," he said. "We'll have to see. I think it's a bit of an overreaction. It's also summer and we probably have thinner conditions."

(Read More: Stocks Going Higher Despite Taper Talk: Pros)

Silver was even harder hit than gold, diving 8.4 percent, though platinum was off just about 4 percent. Steel said the steep drop in prices should mean physical buying will pick up in gold.

McCarthy said the markets also appear to be overreacting. "We're going to live with a large Fed balance sheet for a while. It's not like they're going to start sponging liquidity up. Liquidity is going to keep floating around there for at least a couple of years. This is not tightening. They're basically managing the second derivative of a balance sheet policy," McCarthy said.

The Fed is not expected to move to actually raise its Fed funds target rate from its current zero level until 2015.
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Old 06-20-2013, 01:36 PM   #2
petegz28 petegz28 is offline
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I've argued for the last couple years that the Fed has kept rates too low and thus created a bubble. Many people who have no business in the stock market have been forced into it to chase yield because of the Fed's policies.

When I though QEII was going to end I said the $ would rise and the stock and bond markets would tank. I was wrong because they came around with QEIII. Now that the Fed is starting to signal that the party will be ending shortly we are seeing increased volatility that is going to, once again, hurt those who have been forced into the market that otherwise should never have been there.


The good side is, however, as this happens you are already seeing commodity prices tank which will make the cost of living ease.


The bottom line is that is that the Fed-induced rally we have seen for the last few years may be finally ending. This could be good news that they think the economy is ready to stand on its own but that we have to wait and see.
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Old 06-20-2013, 01:38 PM   #3
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We're close to the end of a secular bear market. If we get another 3% down on top of this, you should start buying.
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Old 06-20-2013, 01:39 PM   #4
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We're close to the end of a secular bear market. If we get another 3% down on top of this, you should start buying.
I'm starting to dip already in small amounts. I'll pick it up as we continue to drop through October.
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Old 06-20-2013, 01:39 PM   #5
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At some point the nonsense has to stop. Even a hint of removing the "crack" from the economy sends markets spiraling. I'm afraid we're in so deep now that it's going to be disastrous when it comes to an end. The Fed tries like hell to talk the market in the direction they want, but the reality is their words are getting old. Just watch what they do.

The last sentence is kicking the can down the road. It was 2014, now it's 2015? It will never end.
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Old 06-20-2013, 01:41 PM   #6
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Quote:
Originally Posted by Stewie View Post
At some point the nonsense has to stop. Even a hint of removing the "crack" from the economy sends markets spiraling. I'm afraid we're in so deep now that it's going to be disastrous when it comes to an end. The Fed tries like hell to talk the market in the direction they want, but the reality is their words are getting old. Just watch what they do.

The last sentence is kicking the can down the road. It was 2014, now it's 2015? It will never end.
The last sentence is pure BS and based on nothing. If the economic data comes in strong they will have no choice but to move earlier. And though they may not raise rates, the curtailing of their bond purchases will allow the marketplace to raise them in and of itself.
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Old 06-20-2013, 01:42 PM   #7
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Quote:
Originally Posted by Stewie View Post
At some point the nonsense has to stop. Even a hint of removing the "crack" from the economy sends markets spiraling. I'm afraid we're in so deep now that it's going to be disastrous when it comes to an end. The Fed tries like hell to talk the market in the direction they want, but the reality is their words are getting old. Just watch what they do.

The last sentence is kicking the can down the road. It was 2014, now it's 2015? It will never end.
Buy more gold coins /stewie
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Old 06-20-2013, 01:43 PM   #8
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Originally Posted by petegz28 View Post
The last sentence is pure BS and based on nothing. If the economic data comes in strong they will have no choice but to move earlier. And though they may not raise rates, the curtailing of their bond purchases will allow the marketplace to raise them in and of itself.
They aren't going to stop buying bonds.
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Old 06-20-2013, 01:44 PM   #9
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Buy more gold coins /stewie
If the DOW was gold it would be at 40,000. The stock market has been a horrible investment.
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Old 06-20-2013, 01:51 PM   #10
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If the DOW was gold it would be at 40,000. The stock market has been a horrible investment.
Is that why when we pull back the 20 year charts they have identical returns? I've already posted that shit. You otoh just make it up as you go along.
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Old 06-20-2013, 01:58 PM   #11
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If the DOW was gold it would be at 40,000. The stock market has been a horrible investment.
That and the fact that gold is fungible, and has inherent, intrinsic value.

You can't touch your 401K without fines and penalties and when you are old enough to access it, it's value will be completely negated by massive inflation.

Suckers!
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Old 06-20-2013, 02:23 PM   #12
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If the DOW was gold it would be at 40,000. The stock market has been a horrible investment.
Speak for yourself. Choosing the right companies to invest in has always been profitable.
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Old 06-20-2013, 02:25 PM   #13
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Speak for yourself. Choosing the right companies to invest in has always been profitable.
If only you would have bought Walmart in 1982, like Greenspan told you in 1998.
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Old 06-20-2013, 02:38 PM   #14
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Gold is a hedge against inflation, nothing more. It amuses me that people call it an "investment"
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Old 06-20-2013, 03:31 PM   #15
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Gold is a hedge against inflation, nothing more. It amuses me that people call it an "investment"
Gold is a hedge against uncertainty. It's net very effective against inflation
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