Wednesday, August 10, 2011


8 silver quarters ($2) could fill a tank of gas in 1964 and 8 silver quarters ($56) can fill a tank of gas today.

Tuesday, May 31, 2011

To QE3 or not to QE3?

Now we are one day away from the calender flipping to June, the market trading story du jour is whether the FED is considering QE3. We are already scheduled for QE2+, wherein the FED ends outright treasury purchases but still repurchases new debt with existing maturing securities. So under no circumstances is the FED balance sheet going to shrink. The only consideration is how the market reacts to the rate at which the balance sheet expansion is slowing.

News Coming in For: 
The Inevitable-or-Face-Central-Bankruptcy Theory (with video!)
The "Soft Patch Case" Means QE3 is Likely
The Bernank will be "Forced to Execute QE3"

News Coming in Against:
A 10% Chance
"High Bar" Necessary to Trigger QE3

Either way, this is the highest priority fiscal news item for the month of June, trumping Greece and PIIGS news a thousand times over. If the market feels QE3 is coming, or should ibe announced as policy, then the dollar will continue to sink, commodities will rise, and markets will rise. If QE program winds down as has been previously indicated, then the opposite will occur. A soft summer sell-off would then be probable and fairly predictable.

Sunday, May 29, 2011

Memorial Day Weekend inflation news round up

The AP is reporting that gas tanks are draining family budgets. "For every $10 the typical household earns before taxes, almost a full dollar now goes toward gas, a 40 percent bigger bite than normal. Households spent an average of $369 on gas last month. In April 2009, they spent just $201. Every 50-cent jump in the cost of gasoline takes $70 billion out of the U.S. economy over the course of a year. That's about one half of one percent of gross domestic product. The median household income in the U.S. before taxes is just below $50,000, or about $4,150 per month. The $369 that families spent last month on gas represented 8.9 percent of monthly household income, according to an analysis by Fred Rozell, retail pricing director at Oil Price Information Service. Since 2000, the average is about 5.7 percent. For the year, the figure is 7.9 percent."

The UK's Daily Mail on recent food prices: Memorial Day BBQ's up 29%.  "Those thinking of hosting a BBQ - even a modest one - can expect to fork out an extra $45 on food to serve a dozen guests. The total cost comes to $199, or around 29 per cent more than last year... and that's before soda and alcohol, according to the latest data for metro New York. Lettuce has sky-rocketed 28 per cent since last year's traditional BBQ, while an ear of sweet corn is now 50 cents, up from 20 cents last year. Those who don't like tomatoes are in luck though: they're up a staggering 86 per cent on last year. Nationwide the story is the same. Ground beef is up 12.1 per cent on last year and sausages are up 6.2 per cent, according to the U.S. Bureau of Labor Statistics.And don't even think about potato salad. The apple of the ground is up 13.4 per cent. Ice cream is up 5.1 per cent, beer up 2.4 per cent and coffee has increased by 13.8 per cent nationwide."

Monday, February 7, 2011

Bond Market Flashes Warning Signs

"The U.S. bond market has begun sending a message that inflation risks are rising and the Federal Reserve may be too slow to act, potentially marking a significant turning point in the economic recovery.

In the past week, Treasury-bond yields have jumped to their highest levels since last spring. Yields on 10-year Treasurys surpassed 3.5% and 30-year yields broke through 4.7%, which makes some worry could mean rates will march even higher."

"Long-term rates have been gradually moving higher in response to an improving economy and rising commodity prices. But in recent days the increases in yields accelerated, a move many say is due to the worry that the Federal Reserve may be underestimating inflationary pressures in the economy, and may act too slowly to tame them. Inflation is bad for bondholders, eroding the value of their fixed returns and sending the prices of their bonds lower."

"The yield on the 30-year Treasury bond ended Friday at 4.732%, its highest since last April. Adding to the almost-panicky feel in the bond market on Friday, traders circulated a chart of 30-year-bond yields showing that the yields had broken out of a 30-year trendline—a sign that the decades-long bull market in Treasurys may be drawing to a close. Most in the market have suspected that the long bull market was likely over. Friday's move seemed to help confirm these suspicions."

"The Fed isn't even halfway through the second round of its quantitative-easing program to buy $600 billion of bonds, commodity prices are much higher, and the economic recovery has been in progress for a year. Rates are also rising because of gnawing concerns about government finances. That will be in fresh relief this week, with the Treasury planning to sell $72 billion of new notes and bonds."

Monday, January 31, 2011

Emerging Markets Pummeled by Inflation

"The political turmoil in Tunisia and Egypt is a reminder of the days when emerging markets were the Wild West of investing."

"While it is easy to dismiss events in those countries as unlikely to be repeated elsewhere, especially in Asian and Latin American nations with strong economic growth, investors in emerging markets are facing a much riskier landscape as a result of inflation."

"While most of the moves in emerging markets haven't been big, they mark a change in the outlook from 2010 when their fortunes seemed much brighter than that of struggling developed markets."

"'We currently view overheating within the emerging-market complex as the greatest macro peril facing the global economy," Michael Shaoul of Oscar Gruss & Son wrote in a research note Friday."

Thursday, January 13, 2011


And it wasn't even that big of a miss! They guided down from $1.85B to $1.70.  This happens once in awhile, especially considering this is a high growth company.  I wonder investors in other high-flyers are going to take this as fair warning, I mean, a paltry 8.4% earnings forecast revision, in the grand scheme of things, is not all that bad. If you're a NFLX investor you must be wondering right now what could happen if the pink ponies and pixel dust dries up on your position, one that has had an 800% run in 2 years. (and almost twice the P/E of CSTR, as of yesterday).

I think it would result in the Smell of Fear. And so it begins. Let's call this for what it is, the beginning of the correction?