Thursday, February 3, 2011

Gold with a massive spike up, to perfectly test the new PRS 177, Bond rates

Now we shall see if this new channel line "holds water" so to speak.

At the very least the PRS lines provide logical places to set stops, so if I was short gold I would have stopped above the PRS 100 (main channel line).

Reality check: Bonds have come down in price, but buying them now could still be disasterous.   People are chasing .5% interest rate (yield), or UP TO 3.5% rates for some corporate bonds, that you could easily end up taking a 35% haircut on.    That is a 10 to 1 risk in the wrong direction.

Because the Bernank is buying bonds with QE2, interest rates stay low.   If however you buy bonds now, and QE 2 stops, then interest rates (yield -- it's the same thing actually, they try to trick you by changing the verbage, it just one of the deception tools in play.  Every industry has these type of deception tools, not just the financials)---the interest rates go up and your bond you already bought become worth a lot less.

It is simple, why would someone want to buy your 5 year bond yielding 1%, when they can buy a 1 year bond yielding 3% say.     Your bond losses massive value unless you hold it until maturity, but how would you feel holding 1% for 5years, when there are other liquid and safe vehicles paying a lot more.

So here is the game....Fed has forced anyone seeking yield into risk assets, stocks, PM's, heck some people might even be considering real estate, even though that has another 50% to fall in many areas.

Unless you are willing to sit on cash, or play or hedge with highly volatile Forex, then you have two choices......very risky assets or zero return.

Zero return while inflation rears it's "hidden tax" agenda, and simultaneously US Dollar value is going down. 

Overall, it's a very sucking situation.

The only winners are going to people playing specific stock patterns and hawking over them relentlessly.   Some of those on my blogroll have been achieving 30% to 40% annual returns through lots of hard work, on a million, that is not a bad "job" to have, for the most part that beats working for a job.   But even then you have to factor in inflation and loss of Forex value (they are kind of interrelated, but also separate)

For those who have nothing, this is a great have nothing to lose.   Except of course when you go to the Costco and can't even afford the food there.   Ouch.

The GBP pound long play....I bank some coin on a big pop last night, glad I was watching because it turned down hard back to the breakout IHS line.   Now I have a new long "buy over" order in.   In TOS the "market order to boy if price is over" displays poorly IMHO...It displays at the current market price, not at the actual buy over price, that is misleading.   So I put on a price level line to remind me of where the order really is.

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Insightful and Useful Comment!