Saturday, May 11, 2013

Ben has Caught the Tiger, Now What

The narrative we are being fed is that all is well, and everything is improving.  That is all well and good for the  Central Bankers if they can jam the stock market higher, at the same time contain energy and financing costs.  This week that has changed, and I think the incredible amount of hot money coming out of Japan is starting to wash over the globe, and investors have taken note.

In Japan and the U.S., bonds are being dumped, Central Banks in Asia are being forced to cut rates as to not disadvantage their exporters. The net effect of all this is commodities have awakened.  Coal, uranium and oil and gas drillers popped, as well as steel and rare earth companies.  I traded CLF, NFX, JRCC, UEC, BTU, SGY, URRE and CHK.  Still in most of these names, plus a few miners (which will awaken as a group very soon).

I may not be the smartest guy, but higher financing and input costs in an economy with no pricing power, debt saturated, and with no income growth cannot be bullish.  We are going to go from the virtuous circle of Fed liquidity to its vicious side.

The Fed and Wall Street have trapped themselves with their own meme.  If things are so great investors are now thinking, let's dump the bonds, buy growth, and protect against the coming inflation.  This will not end well.

For me, I am short SPY into June OPEX, long volatility, long energy and select commodities, dabbling in miners, slightly short gold (until the Yen abates it's fall, or GLD breaks over it's 200), and am interested  in the for profit education names, as they just popped onto my buy screen.

I posted a few charts below.  Enjoy your weekend, as will I. Summer has arrived in Southern California.

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