Saturday, March 03, 2012


ECB launched another round $800B now reaching $1.3 TRILLION in it's version of the FED QE. IMHO there is good chance this along with continued rising balance sheets of the FED and continued 0% rate policy, that markets have a back stop, emboldening risk takers. There have been NO 90% volume days in 2012 as yet, after an historic period of oodles of them.

Since 2005 ECB and FED balance sheets have ballooned to over $6 TRILLION! This money has to go somewhere, the somewhere is into risk markets, commodities, $ carry trades, Bond purchases. The current environment errs on the side of the BULLS, but down the road (I know you're sick of hearing it) there will be HELL TO PAY for all this historic intervention which is causing awesome imbalances of its own. Be on the WRONG song of the trade and get buried.....the BEARS have been obliterated....too early and right equals wrong.

Calls for $1,000 AAPL stock with coming intro of APPLE TV and dominance of other products bring back the halcyon days of the tech bubble. YELP! stock with no earnings is instantly valued at $1B. Internet companies with no or little earnings doesn't seem to bother speculators one bit.

CHINKS in the armor would be LOW VOLUME, rates creeping above 2% on the US 10 year and gaining a foothold above that target. My contacts told me comments from Bernanke last week cause mortgage rates to tick up by almost 1/2%.

A flood out of Risk ON trade would flow money to? Stocks and out of ? Bonds where record amounts continued to reside and flow, even after a double in stock market!

OIL surged to $110 and now gas prices are HIGHEST EVER this time of year with Spring and Summer driving season ahead of us. GOLD got pounded $90 in just one trading day....volatility may have evaporated in the stock market but it is appearing in other areas.

My guess is the recent surge of intervention by ECB with $800 B in its LTRO scheme may do same there as what QE did here....why wouldn't it?

Upside surprise here in the US with a revised 3% GDP number shows our economy has recovered to some extent, it appears that jobs ARE being created, maybe not fast enough, maybe transitory, but jobs are being created.

But higher energy costs are hurting Consumers, and do filter down into economy as everything either uses petroleum or is shipped to market.

That worry down the line happens to be a big one, a piercing of the long running BOND BULL and Government Finance gambit, does the INFLATION GENIE get out of thebottle, and how many RISK PLAYERS would be flattened should certian trends they are long or short reverse while they inject record levels of LEVERAGE into system?


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