(click on chart to enlarge)
CHART AU COURANT: Check out this chart of the 30 year Treasury Bond Yield, spiking to 3.9% Tuesday, then reversing. It was anticipating a FOMC rate lowering, but didn't get it, so reversed. This will likely be the lowest yield seen in many years, which also hasn't ever been seen before! You can see the spike touched the 4 standard deviation band (red line), a very rare phenomenon, in addition to having its stochastic turning up from extreme oversold levels. RATES JUST BOTTOMED OR ARE SO CLOSE TO BOTTOMING, THE BET HAS BE MADE THAT THEY HAVE. Waiting for further decline would be gambling, not risk-adjusted decision making. If you snooze, you lose...
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MARKETS: The "Reserve Primary Fund", a supposedly "value stable" money market, just "broke the buck" as we say when their price drops under $1.00 per share. This should NEVER happen if the fund does the thing it is supposed to do, which is act conservatively to safe guard your money. This IS what happens when your fund tries to be something its not in order to attract attention and new money. SHAME ON THEM !!! The leaders of the fund should be put in jail for fraud! If you think this is bad, the Russian Stock and Bond Markets (that's right, the whole market) was shut down today, for the second day in a row, for no other reason than "prices were down too much"! There logic for you. So, if you were thinking about avoiding the turmoil in the US by going overseas, think again. At least we keep our casinos open (usually, that is. If needed, they'll close ours too!).
The only safe funds are those that ONLY invest in US Treasury Securities, nothing else but T-bonds, T-notes, and T-bills. I highlighted one several weeks ago and here it is again: The safest money market in the country remains the AMERICAN CENTURY CAPITAL PRESERVATION FUND 1 (http://www.americancentury.com/ or 800-345-2021). The expense ratio is extremely low at .48%, they don't use a custodial bank, which means they know where the money is at all times, and they ONLY buy treasuries! Remember, cash has outperformed stocks for the last eight years!
Bear Stearns, Fannie, Freddie, IndyMac, Lehman, Merrill Lynch, and Countrywide are all gone in the last nine months. AIG, the largest insurance company on the planet was just bailed out by the Fed, with the issuance of an $85 billion facility to provide them the liquidity for an orderly shutdown. Is Washington Mutual next? Then who? Citigroup? Both are somewhere between possible and probable. Want to be safe? Put your funds in the money market above and sleep well knowing they do it the right way and barely charge you while they are doing it.This is happening due to very bad judgement, greed, and fraud by our elected officials (mainly Congress). The damage is so severe that major banks and brokers are failing, as listed above. Next will be the hedge funds that have laughingly walked to the bank for the last 10 years, believing their poop didn't stink and they were beyond rules of prudence and fiduciary responsibility. Guess what guys, what went around is coming back around, and if your karma isn't in order, you should be looking for a foreign country without extradition to get to quickly!
Crude: as I've said for the months of mania into the $148 price peak, it wouldn't last and sub $100 is around the corner (see past posts for exact wording if you don't remember). Here we are with $90 oil this morning. I've been buying into this support zone lately, chronicled in these pages, and expect a bounce anytime now into the $110-$130 area, prior to another liquidation wave under $90, perhaps into the $50-$80 range. Impossible you say? Well, you probably didn't believe me either when at $140, I said watch for $100.
Euro: Yes, here too, my system called many opportunities to short the euro and buy the dollar in the past six months, even recommending those with foreign currency exposure to stop avoiding the dollar and begin being dollar friendly in transactions (see past posts for exact wording if you don't remember). Since then, the Euro has fallen from 1.6000 to 1.3900, a 13% simple gain. Again, at the time of my forecast, everyone else was calling for the death of the dollar.
Housing: you know where I stand, as I have forecast the destruction of this market for over a year and a half. It's early in the liquidation, so wait to buy. And, if you haven't sold what you're not living in...hmmm...I'm sorry for you.
Precious Metals: Peaked and going lower, but a bounce is due now. Gold will be very attractive closer to $600 in coming weeks to months.
INTERESTING PLAYS TO LIGHTEN UP ON OR SHORT SELL: Currently, there are no open short positions. But, stay tuned. We took amazing profits last week into the Freddie/Fannie failure volatility.
INTERESTING PLAYS TO ACCUMULATE OR BUY (if you have to in a dangerous environment): See August 11 posting for profit taking on a lot of former trades. MSFT under 23, adding under 18, YHOO under 20 or above 22 and adding under 13 (entered 19.82 on August 11), GOOG on break back above 475 or under 461 (entered 460.99 at 9a on 9/3) and adding under 400, EBAY on break back above 22 (lower from 24 on 9/15) (entered 21.99 on 9/15) and adding under 17, SNDK under 12 or above 15 (entered 15.01 on 9/5, using 13.48 stop as of 9/10), GRMN under 30 or above 35 (down from 36 on 9/16), DELL under 17 and adding under 10, SMH (entered @ 25 on 9/15 at market open) adding under 21, SLV entered 10.75 and adding twice this amount at 7.75. GS under 118 (entered 117.48 on 9/16 6:09 am) or above 130 and adding under 88 (lowered from 95 on 9/17), C which is riskier than most below 15 (entered 14.99 on 9/17). GE under 23 (entered 22.99 9/16), MS under 18 (lowered from 24 on 9/17) (entered 17.99 on 9/17), WGO under 9 or above 13, JEF under 14 or above 19 (entered 19.01 9 17), SBUX under 13 or above 17, UWM under 43 or above 46 (entered 46.01 9/16), RIMM under 95 (entered 94.99 9/16) or above 100, AAPL under 135 (entered 134.99 9/16) or above 140, INTC under 19 (entered 18.99 9/16) or above 21.
In Crude, I will buy any test of 100 +/-2 or a break above 112 now (entered $101.78 on 9/10) adding near $90 (added $90.98 on 9/16 @4:30am PST). Again, this bounce is a relief rally, and we see a certain test of the 80 area coming in the next 3-8 months. Re-entered the Euro at 1.4439 @ 8a on 9/3 and I'll add second entry back if under 1.4050 (added 1.4049 on 9/15 @ 4am PST, stop on this second position only at 1.4000 entered 11am PST), and I will exit above 1.5000. If stopped out on second, I'll add second back above 1.4439 or under 1.3999.
For what it's worth,
Ken
