Silent Service Method

Ohhh... Is this the Aussie H4 making an attempt to turn? LL in place... but right back into demand. Second tap... sell weakness? I am definitely looking for a knee jerk reaction today to enter some positions... and there seems to be a heavy consenus to QE3 = YES. I dunno... it just doesn't seem right this time around... but I am no fortune teller... nor do i understand the global economic or social impacts. will wait patiently for the time to strike.

Haha, good thing I'm still trading 'learner size' lots...

Get your risk management down too mate. You always need your stops in place. For instance i wont risk more than 40the pips on a daily chart play. I wait for price to fit my setuo, not the other way around.

Yeah I change my lot size depending on how many pips stop loss I set so I risk about the same amount each time. Just trying to get the right balance between entering too aggressively and entering after confirmation with too much risk.

Mainly because there is concern that the Euro won't exist in a few years.....also, the banks can now feel better about those bonds that are going to be defaulted on in a few years. Its a temporary bump for the Euro....but then again, nobody can kill a currency like the Fed!

Don't forget to look into gold and silver.....those are the real currencies that are going to gain from this.

Just a quick note from your friendly neighborhood mortgage trader.

As many of you know, I trade Agency MBS for a major US financial institution. OK Fine, many of you didn't know that. Be that as it may... What the fed announced today is a BIG DEAL. Agency mortgages are those MBS securities issued by Fannie Mae, Freddie Mac and Ginnie Mae. I.e. most mortgages (90%) issued with a loan size under $625,000 will be insured by one of these 3 agencies.

Anyway, the Fed said they'd be buying an additional $40bn/month in mortgages after today. Now, keep in mind, they've already been buying about $25-30bn/month for the last god knows how many months now. So combined with their other maturities, they'll be investing roughly $80-85bn/month over the next several months into the agency mortgage market. You're probably wondering... so what? How does that affect me? Well, i'll hazard a few guesses (none of which may turn out to be right) -- You've already hit on the first that the dollar goes down. Second, taking this much supply out of the market forces large institutional investors (such as myself) into other, more risky assets. Instead of buying MBS we might buy a private placement, a high yield bond, a real estate loan, or god forbid a common stock! And so the $100mm we were going to put in MBS goes elsewhere which means that $100mm of someone else's money goes somewhere even riskier and so on, and so on. The end point I think is higher asset prices, and yes, that includes stocks.

Just to put that $80bn in perspective. Last month there was about $100bn in GROSS issuance of agency securities. So the Fed is taking down about 80% of that?! Yikes. Another ancillary benefit to all you homeowners is that interest rates on mortgages should stay low for the next few months (at a minimum). SO that 4% mortgage you just took out and patted yourself on the back for, you'll be refinancing that into a 3.5% 30yr fixed (or maybe even 3-3.25%) in short order which will put more (nominal) money in your pocket which you can spend on higher food prices!

Anyway. As chris said, Gold/Silver/and other *real* assets are the way to go from a long-term perspective. And in the mean time... DON'T FIGHT THE FED. It's trouble for your pocket book (See anyone who shorted the stock market in 2009... it's not fun!).

Anyhow.. That is all. Good luck out there.

Absolutely - remember the descending triangle debate a few weeks ago.

QE3 = more Inflation.

Simple as that.

Perhaps in the long run, but not necessarily in the short-run. Hows the price of your house? How about the price of a flat panel TV or a lawn mower? Sure the price of gas is a little higher and we had a drought so the price of food will be higher, but in order to get inflation you need people making money, driving up the prices of goods & services -- with 8+% unemployment (or a lot more depending on how you measure it), there isn't as much money out there chasing the assets...

If anything, i could see the US heading more towards a Japan situation with persistent deflation -- we have an aging population -- boomers about to retire. Retired people spend a lot less money.. they downsize their house rather than upsize it.

So unfortunately, i don't think it's "as simple as that."

I think it is as simple as that depending on where you are in the markets....but you have to be selective about how you play it. I think physical metals is one of the best ways. Why? Because they are going up in value over the long run as well. I have actually been buying silver physically more than paper wise.......

But agree with the above points as well.

I think a more appropriate word is Stagflation.

Stagnant economy and raging inflation.

Prices where I live (Israel) just get higher and higher, houses as well.

Here is the thing, all the money from those QE are stuck at the Banks and don't go to the local business and the public. this money creates new bubbles in the capital market.

Look at the charts of all commodities, all of them are at high levels (Corn, Soya, Wheat etc).

I don't see why QE3 will assist while it had failed in the last two times.

It's possible some of it does get stuck at the banks in some ways. But in this case the money is going directly into the MBS market -- so the Fed is nearly directly financing consumers. The big banks, are making as many HARP loans as they can -- These are borrowers who bought their houses in say 2005-2008 (i.e. the bubble years) and have seen their equity slide from say 30% of the homes value down to 0% or in some cases negative (i.e. I borrowed 300k and the home is worth $250k now). So in other words, you have made 48 payments or more in a row might have a 6% mortgage but if you could refi at current rates you'd have a 4% mortgage.

Real example: What if you bought a house for $400k in mid-2005. You are a responsible borrower and put up $100k of your own money and borrowed $300k in @ 6% = this gives you a monthly mortgage payment of $1798/month

Today this hypothetical house is worth only 250k and you now owe $272k (this is the exact amortization this loan would have after 5.5yrs) on it. If you refi'd today and got a 3.75% rate (on $272k), your payment would be $1260.

So one of two things happens: a) you get an extra $500 in your pocket every month or b) if you continue making the same payment you were making before ($1798), you'll pay off the house in 17yrs instead of 24yrs from now. So you either get spending (stimulative to the economy) or you get savings/deleveraging in the economy. If you're one of those that think debt is the reason we got in this crisis in the first place, this second option is appealing. Either way the Fed policy leads to this type of scenario being possible.

Yeah, I see them and hear about them all the time. I'm really not that surprised though... The Drought in the US has been well publicized with something like 50% of the US corn crop destroyed by drought. Not only do we use corn for the usual items but it's also a major ingredient into feed (so not having it makes cattle more expensive to maintain/feed/etc and has made beef prices go up). Take a look at the pictures that come up on a google image search about the drought. That's scary stuff. Chris could probably do a better job talking about it as he's closer to it in Ohio than I am in new jersey. But if you really look at when the price of corn started moving up it was around the time we were getting news about how bad the drought was getting in the midwest.

There are economists far smarter than I who can debate that point, all i can say is that stocks are about 100% higher than from where the Fed originally did QE1 and unemployment was 10% then and 8% now. From everything I've read recessions that result from credit crises are longer and deeper than your garden variety recessions. I still haven't read "this time is different" but I keep hearing good things (Reinhart & Rogoff)... I think that puts more numbers behind what to expect using examples from past credit crises.

So are you short Stocks? Short the USD?

Anyway -- To bring this back to current investments. I'm with you Chris, I've been legging into a physical silver/gold positions that I really don't plan on ever selling. Just buy some coins now and then, sock them away and forget about them. So far i've bought a bunch of "walking liberty" half dollars, some Morgan Silver dollars, some bullion, exactly 1 1oz Kruggerand, and a few other smaller gold coins. I bought a house because there aren't making any more land (at least not in NJ where I live). I bought a few stocks, most with some dividends on them. Bought a 529 (that's a college savings acct for you non-USAers) plan. In short bought Assets... Because while cash might be king, but it doesn't yield anything!! And we should get SOME inflation, so holding cash is a negative return proposition...

Specific Names:

I think I mentioned RYN (Ryonier) somewhere way back in the thread.



TAP -- They say to buy what you know, and I know Coors Light and Molson Canadians. (Plus you can't buy stock in PBR...can you?)



TGT -- Sure it'll not do well during "risk-on" days but it's a solid company.



I have a bunch of others but won't bore you with them. As always, enjoyable hearing everyone's opinion! Good Luck out there!

Grain prices are where they are due to the drought its that simple.
Metal prices are where they are for any number of reasons and none in particular in my opinion.

In the end it does not really matter why, it simply matters that it is.

Enjoy the weekend folks.

Nice touch trade from the inter-day session.

I agree with that. I think that those markets are more speculative than it used to be.

Have a great weekend.

Can anyone see Dollar strength next week? - me neither - think I'll pass on this one

Not sure about this but I like the location and it goes back to 2010. It's a 2 day pb btw..

No matter how hard I look the only pairs I fancy involve the Swissie LOL.

This one is tempting.....but gonna pass. Already short AUD/CHF.