Aug

14

The surest way to put the brakes on the upward action is to give a hefty boost to the margin requirement. The current $6000 for an $180,000 contract is just too rich a target to pass up.

On the financials which, to my mind, are being given a well deserved beating, I'm looking for another "Christopher Cox" moment. For those who may not remember the last time our nation's highly regarded bankers (including the holy of holies, Robert Rubin) received a drubbing, Cox issued a prohibition against shorting stocks in the nations 20 or so largest financial institutions. I recall it well as I had a large SKF position which really got nailed.

However, I was still in the green, though substantially less so. Cox, apparently aware of some lingering gains and a recovering SKF, shortly thereafter expanded the "may not short" list to include something like 719 financial institutions. The party was over.

I wouldn't be surprised to see it occur once again as the usual ranters (who remain remarkably quiet during bullish bubbles) are heaping complaints on the HFT system and its contribution to the current downdraft on banking equities - complaints that are gaining traction as the French now feel equally grieved as their banks just underwent a similar brutalization..

I find myself in a similar situation currently with precious metals (long) and banks (short). I've attempted to partially hedge each position with the appropriate ETFs but am skeptical that it's enough. Wall Street's Cramers and fellow-travelers get especially nasty when their icons get shellacked. However, mums the word when dotcoms and real estate go parabolically skyward - just ask Al "Irrational Exuberance" Greenspan. The Street will exact its pound of flesh.

Jack

By the way, someone commented that Prechter has been wrong all along on gold. That is absolutely correct - he has been similarly mistaken on silver.


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3 Comments so far

  1. Anatoly Veltman on August 15, 2011 11:17 am

    Prechter is an intermediate term analyst. CNBC scheduled him into stock market hole - not anybody’s fault. My personal outlook remains that stocks will break the lows (in accord with Prechter) - but of course after a trader rally, which will suck a lot of sideline money in…

    On Gold: long-awaited FED meeting came out maximum Bullish for Gold. It enabled the $1817 print and will further enable Gold’s next run, following a sizable correction of recent excess.

    Where I think I heard Prechter right, he called for continued Treasury strength. That’s were I disagree with him most

  2. Nick Pribus on August 15, 2011 2:48 pm

    Perhaps having been so wrong about gold so long leaves me more emotionally connected to my earlier call that it should settle at the marginal cost to find and extract from the earth, which is somewhat closer to $500 than $1,800. I did a similar analysis on AOL some decade ago in another bubble concluding that they would need something like 5 billion subscribers to justify the market cap.

    In high school drafting class many years ago when we still used pencils and t-squares I designed a gold rocker that may even have won a ribbon at the Sacramento county fair, and in the next door wood shop they built that same gold rocker and it may also have won a ribbon. Actually, the wood shop built a few of them and the shop and drafting teachers were taking them out on the American river just north of Folsom prison on weekends to pan for gold the old fashioned way.

    The year was 1980 and gold peaked at $2,251 inflation adjusted. I wonder how many were out panning for gold this past weekend.

  3. Anatoly Veltman on August 15, 2011 3:17 pm

    I don’t think Gold will ever trade $500, as $ is being sufficiently debased. A bear market might carry it as low as $800.

    At this point in financial history, it will likely fluctuate between $1350 and $1850, propped by the FED’s promise of ZERP to continue

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