Feral Hogs And Traders
The heading of today's letter might just as well be "A Tale Of Two Cities." Richard Fisher, currently the non-voting member from the Dallas Federal Reserve Bank, got on his horse and rode. He used inimitably Texas language.
He called traders "feral hogs," (a particularly nasty beast as dirty and vicious as any walking the Earth), who scent any weakness in a market and immediately test the weakness. (Real feral hogs cause about $1.5 billion in damage to American crops and property every years. So weigh for yourself which variety is more loathsome.)
He went on to say that the FOMC statement was issued because it "made sense to socialize the idea that quantitative easing is not a one way street. He also emphasized any tapering would be done cautiously.
"I don't want to go from Wild Turkey to Cold Turkey overnight," Fisher said. At least he didn't say "to Cold Duck."
Fisher made it clear he believed bubbles had developed in a number of financial markets, mentioning emerging markets and real estate investment trusts. He also noted that companies issuing bonds with a triple C rating, which is junk status, could now borrow for less than 7 per cent.
Meanwhile, as predicted here, China equities have entered a bear market. This is a dangerous sign for other economies, especially the United States, which is China's chief partner for not just exports, but imports, too. (Leaving aside energy shipments.)
Surprisingly, this could end up being a bit of a boon for gold, since risk has re-entered many markets in many parts of the world. Junk bond funds and freelancers have been absolutely hammered by the Fed statement. In fact, bonds in general have been hurt. There has been a 30-year bond rally. Well, it may just be ending now.
The big question in China is whether this is true bear market - emerging economies typically see greater volatility - or just another upset of the month. There is also a question now as to how reliant on Federal Reserve financing via QE3 traders worldwide have become. To compare to an individual... if you had a million dollars to invest and then were relatively quickly given access to 10 million, your trading and investing patterns would change fairly dramatically. And they would change again if suddenly you had to revert to, say, only 3 million. We know - high class problems.
Strikingly, many Fed presidents are now walking back the comments by Bernanke last week, even the hawkish members, whether voting or non-voting. The lead dove said volumes today in Switzerland.
William C. Dudley, president of the New York Fed, who now occupies a permanent seat on the FOMC, said, "The Federal Reserve has fallen short of meeting its employment and inflation objectives. This suggests that with the benefit of hindsight, U.S. monetary policy, though aggressive by historic standards, was not sufficiently accommodative relative to the state of the economy."
Dudley is a guy who ought to know. He lives in the city that's overrun with feral hogs - er, traders.
P.S. - Where's the fiscal policy from the legislative branch and the chief executive?
Wishing you as always good trading,
Gary S. Wagner
On a technical basis a case could be made for Friday’s price point being supportive in both gold and silver. However it is the fundamentals which move the market, and the fundamentals in this case continued to move both gold and silver platinum and palladium lower in trading this morning. As the market opened in Australia on Monday morning we had neutral to higher prices, but that would be short-lived. It’s all about Asia. Once trading moved over into Asia there was absolutely no buying the dip mentality and in fact concerns about liquidity in China cause the market drift lower. On today’s video we will look at technical support levels below where the market is currently trading.
Long gold @ 1293 out @ 1285 - $8
Long silver at 20.02 out @ 19.60 - .42
From the week of 06.07. 2013
Gary S. Wagner - Executive Producer