Bill Cara: Shift from equities to bonds underway, Mon., June 5, 2006, 2:58 PM

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June 5, 2006

Shift from equities to bonds underway, Mon., June 5, 2006, 2:58 PM

Ben Bernanke was speaking live on CNBC as I started to write this. He is saying that a slowdown in economic growth is underway, but, no matter, he's going to fight like a hawk against rising inflation. LOL

He's got a problem on his hands, and here's how he's decided to fight. He knows you are going to leap from the equity rooftop, but he's dropping Fed rates (you watch!) so you can catch your fall in the U.S. Treasury bond net. But he doesn't want you to see that so he's telling you he's going to be an inflation hawk.

Not!

You see he needs your money to buy the Treasury Bonds (somebody has to pay the cost of government), and he needs you to stay in your home paying mortgages. And his bosses (Goldman Sachs, JP Morgan, Lehman Bros, Bank of New York, et al) are telling him that 10-year Treasury Yields below the Fed Funds Rate are killing their business.

What is going to happen now is that the U.S. taxpayer interest in the gold holdings of Ft. Knox will be depleted as the Fed traders sell gold (to buy bonds) and try to hold back the gold boom.

Americans ought to realize who is going to buy every ounce of gold they can get their hands on: the new middle class of the world in China and India " the ones who took the jobs of the once well-to-do Americans.

I just heard CNBC economist Steve Liesman opine that the Bernanke speech was a "victory lap". Oh puleese bring back Kathleen Hays from her exile at CNN. There was never a reason to terminate her, and her replacement Liesman is bar none the worst Talking Head at arguably the worst financial media in the world.

Kathleen Hays is terrific; Steve Liesman ought to be doing the weather. If Wikipedia would allow me the pleasure, I'd finish writing their material. LOL

So gold has taken a dip here. Did you really think that Ben Bernanke was going to give a major speech without telling his Bull in a china shop head trader (Bank of New York senior officer) Dino Kos not to drop the hammer on gold?

No problem. If you are long the Dow you do have a problem though. It's down over 135 points here. That's the problem.

Re Gold, Bernanke is just making it cheaper for us to BUY.

Posted by Posted by Bill Cara on June 5, 2006 02:58:51 PM | Category:

Discourse

Bill-

Maybe that's why the charts looked so "nervous" to me this morning. I exited all trading positions in the miners this morning and my IMO long as well. Pretty lucky call.

Posted by: MarkM at June 5, 2006 3:09 PM [link]

You know, maybe Ben will start to realize that by talking and saying nothing directly, i.e doublespeak al la Greenspan, he will be better off, lol, it seems now with MariaB conversations and a few times he has opened his mouth, the markets move drastically, and that is a big X factor now.

Posted by: Jason22 at June 5, 2006 3:17 PM [link]

Bill, you're too funny...it's like you took the words out of my mouth on CNBC's Liesman...I've been thinking for years that he is absolutely the worst! I liken him to a Kudlow wannabe...a status he never, ever will attain

Posted by: glenn-mp at June 5, 2006 3:44 PM [link]

MarkM - I'm still slow but I caught your wink this morning. I think you initially thought it wouldn't happen today but catching the speech live guaranteed I wasn't too late to pick up on the ensuing knee-jerk.

All - I've been doing my best to research the juniors, including going through old posts and Bill's writeups. The hedging report by real1 was particularly informative as well. From going through the old comments, it seems like I'm not the only one who could use some 'more' direction when it comes to researching the offerings here. So to anyone who cares to share their knowledge/opinions on these juniors, I'd love to hear it as we look to approach another accumulation opportunity.

Posted by: rusticuf at June 5, 2006 3:45 PM [link]

MarkM-

Sold to you! I am looking to buy gold here again.

One minute he says that the economy is slowing, the next he is a hawk. That's called stagflation and is gold bullish, regardless of short term price action.

ps I'm guessing that you are still long gld, just a little friendly razzing ;-)

Posted by: g034 at June 5, 2006 3:45 PM [link]

g034-

Just a trade my man. Just a trade.

I am looking to buy also. I thought it was going to be by mid-month, maybe a tad bit later. I'm moving that up a bit. I had 7-10% in some of those names and 13% on IMO so I think I'll be buying them all back lower.

Long: GLD :)

Posted by: MarkM at June 5, 2006 4:33 PM [link]

I got shook out today here, too. The tell was the miners' decline in the face of steady spot prices after the open. Wish I had the resources to track http://stockcharts.com/h-sc/ui?c=$gold:$gdm,uu[h,a]dalaniay[dc][pc155!f][vc60][ila12,26,9] in real-time -- it could have told me plenty.

Posted by: omphalos at June 5, 2006 6:20 PM [link]

ooomph-

That will happen when the equity markets are getting killed so I wouldn't rely just on that. My read came before the open actually.

We'll see if wooden cannons fooled me or if I stole a march on Lee's army.

Posted by: MarkM at June 5, 2006 7:36 PM [link]