More Quantitative Easing?
Research for Online Investors

by John Dalt

6/12/09

Yesterday the 30-year bonds sold better than anyone expected. I was caught off guard, although we had planned our stop losses on the TBT position in SwingTrader. Our customers were ready for a selloff with a trailing stop entered in their computer at $58. This was important because of the potential swiftness of movement on this position. We were prescient in our preparedness, as TBT dropped $2.08 in twenty-seven minutes!

It did not make sense that bonds would sell strongly, when the day before the 10-year bonds met resistance. Adding confusion was that the dollar sold off, while interest rates were going down. One would normally associate lower rates with a stronger dollar. The dollar had been falling since the beginning of March and bond sales were weak the previous week.

Today the dollar popped higher. This week’s auctions were for only $65 billion compared to last weeks monstrous $101 billion! Can you imagine we just auctioned more bonds in two weeks, than the annual national deficit of just a few years ago?

The Fed has spent over half of the $300 billion they committed to print for Treasury bonds purchases. This program was to end in August, but Bernanke has floated the idea of extending the plan with additional ‘quantitative easing’ of as much as $700 billion.  That is a BIG checkbook, as this chart shows.

Like most bubbles, it will pop with great anguish!

I recommend never entering trailing stops in your computer on long-term portfolio positions. Market makers can see them, and dip the market to take you out. Many times on trading positions, we enter our stops in the trading program, so we protect our profits.

Here is a great video of Congressman Grayson asking the Federal Reserve Inspector General, Elizabeth Coleman, where the trillions of dollars lent by the Federal Reserve went.  How many trillions? You have to love watching government watchdogs that do not watch while trillions disappear. Who in their right mind would put these people in charge of anything?

Congress is working on a plan to take over health care. The Wall Street Journal has a great article on the struggles faced with paying for this “money saving” plan. Why does it cost so much to save money? The government, everything they do costs more. Like P.J. O’Rourke says, “If you think health care is expensive now, wait until it is free.”

Guess who is fighting some of their funding plans the hardest? Unions, because the biggest beneficiaries of gold plated health plans are teachers and other union members. One of the few ways to raise enough money to “save money” is to tax employer paid health benefits. McCain offered this solution during the presidential campaign, and was savaged by OH! Bama and others. Just like poker, the worm turns!

In 2007, congress passed a bill that automatically raises the minimum wage. Another jump to $7.25 will take effect on July 1, just in time to put more people out of work. The Wall Street Journal has a great article, with good research, on the resulting job losses. Did you know that raising the minimum wage hurts poor families? Estimates are this wage hike will cost another 300,000 jobs. Almost as many as lost jobs in May.

Russia had 18 Czars in its history. How many does Oh! Bama have?  He even has a Great Lakes 'clean up' Czar.

How many nuclear weapons does N. Korea have? If you answered seven to ten, what would you think about 100 to 300? When scanning the internet for interesting stories, I always like to check Asia Times. Kim Myong Chol author's this week’s article; he is an unofficial spokesman for N. Korea's little dictator Kim Jong-il.

According to Kim, Kim has plans to explode our nuclear power reactors, set off nuclear warheads in outer space and underwater off our shores to create tidal waves. Oh! Bama needs to grow some to handle this threat; I do not know if he is capable of dealing with a mad dog. To understand how dangerous the world is, “Nuclear war is Kim’s Game Plan” is a must read.

"Giving money and power to government, is like giving whiskey and car keys to a teenage boy"
----------------P.J. O'Rourke

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions. It may contain errors and you should not make investment decisions based solely on what you believe you have read here. Do your own research, it is your money. If you lose it, it is your responsibility, not ours or your grandmothers! The editor may or may not have a position in any securities discussed. The editor may have held a position in a security earlier, or in the future.

MarketToday Home Page

Back to Top