Friday, 16 October 2009

Hair of the dog asset bubble fueled by QE

The Dow has hit 10,000 and Goldmans and JP Morgan in the US have beaten their Q3 estimates. All is good in the world and so the rally continues. This week and next are key weeks for the stock markets in the US and UK because so many companies are reporting Q3 numbers.

With every company that beats its number, the rally grows a bit stronger. I really did not see this coming (although am long stocks so it is all good). There really should have been a correction by now as markets are very over-bought considering the state of the economy.

There is only one answer as to why the correction has been put off; that QE is such a powerful drug that it has kicked of the mother-of-all-hair-of-the-dog-asset-bubbles. This really gives me the heebie jeebies as it means the Stock markets (and everything like gold, oil etc is correlating at the moment) is going to be on one huge roller coaster for the next few years with massive ups and downs.


RM said...

One of my thoughts is a 6 month contract shorton the ftse. I am not convinced that current levels can be sustained. Just a though, any views?

Steven_L said...

Wish I'd hung onto my long oil cfd's for a few more days now, would have made another $800 or so.

I've got some cash sat on the sidelines at the moment, and to be honest, there aren't any mainstream stocks screaming at me to buy so it'll probably stay on the sidelines for a bit.

I'd been watching Punch Taverns and they've just announed more writedowns. If you minus goodwill from their balance sheet (and I always would for analysing a pub company) and cash (which can soon change in a loss making situation) they are in the red based on the new valuations of their estate.

I'm very glad I didn't buy now, and will keep watching to see if I can pick up some distressed assets to stick under the mattress.

Houdini said...

Well, if there is an adjustment and people take their profits, where are the y going to put it as an alternative? Most probably think it is as well where it is than anywhere else.

CityUnslicker said...

@RM - I have a hunch the FTSE will hold if there is more QE announced.

@SL - I have been having some success with small oil exploration stocks. I like AST.L who are due news very soon and EME which is really risky. Perhaps a long on the pound to for a short while as although in a downtrend is very over-sold.

Houdini - The trick is to get into cash for the shakeout and then back in for me.
That is how to rise the rollercoaster of the next few years, buy and hold will make minimal returns.

Anonymous said...

Don't forget that the markets are also reflecting the devaluation of the currencies, - £ and $.

The index does NOT tell the whole story, since the majority of currencies in it are also under pressure from QE to monstrous levels.

Position levels still show unbelievable capping on PMs, although delivery problems and fraud on Comex and LBMA are increasing exponentially, and will blow (default) soon. Bodies standing for delivery are currently being offered $1,250/oz to walk away from delivery, which tells a significant story!

Vaulted gold ingots, marked good, have been discovered hollowed out and filled with tungsten, which places criminality at a very high level. The New York-London axis of suppression has a limited life expectancy. They've got bugger-all physical left!

Independent Audits are consequently being carried out, at the insistence of investors! GLD and SLV are under suspicion. GLD as providing customer allocated gold for delivery!

Everything is false.

The west pays billions to banks, and increases debt levels throughout the rest of their economy. China spends billions on mines, infrastructure, and tech, - whose gonna win?

Paper gold exceeds physical gold in the world by 800 times!

There's going to be some massive derivative defaults coming soon.


China peg to $ has the effect of holding the $.

Just watch when the peg is moved.

You couldn't make this stuff up!

I said a while back that this would play out on Forex.

James Higham said...

That's how crashes occur.

CityUnslicker said...

Anon - I wonder hwo JP Morgan's gold short position it feeling right now.

roym said...

Citi and BofA weren't so clever though. looks those Goldman's boys and girls will have deserved those bonuses! anyone know when our lot report? im still waiting for hester to do the business with rbs (wish id bought barc instead)

Sebastian Weetabix said...

Those of us who bought Barclays back at <50p are feeling somewhat smug right now.

Anonymous said...

GEAB, happy reading for the weekend

CityUnslicker said...

Those of us who bought barc at seventy and thought they were well clever selling at 90 feel a little sillly now.

Still, 270% up on the year so far with some big risk plays in place so we'll see how it goes.

All my money in barc would have done a little better with less stress though.

Anonymous said...

Have lost a ton over the past couple of months on shorts. Have moved out of indices and into fx for the time being.