Fed minutes are due out today at 2:15 EST… Traders and other nervous Nellie’s will be looking for the Fed telegraphing its plans to hold or start a round(s) of tightening…Seriously people, my advice is to go have a coffee break between 2 and 2:30, let the dust settle.
All that will happen, I imagine, will be a brief bit of volatility like a rubber band, where at most we will explore the trading ranges of the day..Perhaps the yield curve futures will have a bounce or two, but most of what the Fed is planning has been priced in at this time…Honestly, with interest rates at zero, even my third grader knows that sooner or later there is only one way for these rates to go…that’s higher.
Add in the new PANIC DISCUSSION TALKING POINT which has moved from sub-prime foreclosures to THE CARRY TRADE OF ALL CARRY TRADES where now, my thoughts are, we will be hearing about the next bust to come in asset classes when the dollar “rallies 20 or 25 percent”…well, its refreshing to be able to listen to some other bit of news…
It seems that the sky was falling, the sky fell, but there is still some sky left up there yet to fall… what a relief for the cable network news anchors who now have some new gloom and doom to focus on…
Honestly, I have no idea how the carry trade will resolve itself… My guess is that no one on TV does either, but that’s just my opinion…I do know that something dramatic and scary and terrifying is what the cable network news people like, be it “deadly flue virus” or “balloon boy”… In a very real sense, they have co=opted finance as their go-to story to freak-out their viewers…So my advice is to take their info-tainment with a grain of salt.
That is all…
Back to reality, the grains were higher last night, and with Gold making fresh new highs, we will finally find out through the rest of the year the answer to the question “How high is too high?”… Perhaps we can rely on India to keep buying all the reserves from the IMF, I mean why stop at 6.7 Billion worth? What country will be next to step up and chase some gold reserves?… With Gold approaching 1,100 .it will only be a matter of moments before we start seeing adds for 3000 dollar gold…
Ten years ago gold couldn’t get above the ‘magical 400 buck level’ here it is, we’ve almost had a triple, and nothing gets prices higher like higher prices… Just go back in history and you’ll see this pattern repeating itself over and over…
My point is, at some point, people will wake up and realize that gold, like grain, debt futures, and stocks, is just another asset class… We saw the stocks have their day, the grains had their day just 2 years ago, and now, it seems, its time for the metals…Of course, that’s just my opinion…
At different times in history, the store of value has been in different asset classes..When I was a kid, in 1973, gold had its last big run up.. Those people who bought gold at those old highs are finally getting rewarded for buying and holding… In the mean time, they watched their “risk less store of value” languish at 1/3 of its high prices for about 35 years… What a marvelous investment.. Just food for thought…Pull up a long term chart of Gold, and you’ll get a graphic representation of what I am saying..
That being said, it feels like it may be time for the metals to have their day in the sun…
Along with the metals, we should have higher grain and oil prices as well…The Macro trend is up…And like they teach you in trading 101…Don’t fight the trend..
The trend is your friend….Of course along the way, there will be enough pullbacks, corrections, head-fakes and similar moves to spook you out of the big trend…five years from now, you’ll be looking at the long-term charts saying, oh look, it was so obvious..
I should have gotten long, put a stop in and stopped reading the paper and watching TV… But you and I both know that’s easier said than done…
Along the way, those ebbs and flows will be opportunities as well…
Good Trading