BONDS SAY THIS IS ALL BULL

WHAT DOES THE BOND MARKET THINK?
Yesterday we had a nice rally in the equity markets as we had a "risk on" day and everything is wonderful again. It seems that policy leaders and economic talking heads would have us believe that the situation in Europe is manageable and there is nothing to worry about.  Stocks rally, we all take a deep breath and sigh that the collapse has been avoided, yet we can still look at one indicator and know that it is all a lie.

10 YEAR TREASURIES AREN'T IMPRESSED
In the midst of the risk on recovery we see that nothing has altered the trajectory of the 10 Year yield as it continues to dive lower.  The other day we did hit a 1.65% yield but today we still are near 1 year lows at 1.642%.  As I examined the rates I took a double take as I recalled that in January of 2012 I mentioned that a 1.50% to 1.60% level should be expected (CONFIDENCE LOST, 13 FOR 2012).  Now that we are here, one has to wonder if a 1.25% or lower could be in our future?  I also targeted $84.00 for the US Dollar Index and we are getting quite close there as well.  If you haven't read the 2012 predictions post, you should as you will be happy to see that your humble host has been spot on with many of the predictions.

THE FED WILL TAKE ACTION SOON
The debt markets continue to signal that things are not going well and institutional investors fear losing their capital more than they fear not earning.  Greek elections will soon come in focus over the next few days and will weigh heavily on the markets.  Can you believe that the Fed will seriously consider adding more liquidity to this market in just a few days?  I am hearing from many of my friends that they are refinancing and it would seem like this would be a great time.  If you are one of those guys that must be able to brag about the lowest refi rate you received at cocktail parties, I would suggest you hold off as lower rates are still coming.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/

PASS THE PARCEL - DEBT GAMES

DEBT BOMBS
Please watch this 4 minute video that highlights the problems that the Eurozone is facing.  Every day that I consider the situation I am still in awe of how the leaders of these countries will destroy their own nations to preserve a broken system and a stack of lies. 

It takes a courageous man or woman to stand up to institutionalized fixtures and fight for what is right and just, especially when it might create short term pain.  Unfortunately there are no courageous men or women in Europe or the US to make this kind of stand.  This thought is only reinforced when we look at the Penn State situation.  In the US we exalt football to the level of religion.  We hear that it is a man's game and rite of passage where leaders are made and it is where the our nation finds its heros.  Yet, even on this battleground of excellence we find silent men that follow procedures instead of doing the right thing.

I'm sure the FED and IMF will attempt to ride to the rescue of Italy and the Eurozone this week, but we all know that it won't help in the long run and by the assessment of the video, it won't help at all next year.

Enjoy.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/

TRADING UPDATE - SLV BREAKING OUT

I'm running around today and don't have much time to post, but wanted to make a brief post.  Overall the last couple of weeks have been nuts.  The 1000 point drop and subsequent intra-day rally of 700 points followed by a 200 point loss followed by a 400 point gain leave us all wondering what the heck is going on.  As a longer term investor it frankly makes me shake my head and want to pull out and wait until the true trend emerges.  As many of you know, I believe the true trend is down, we just have the invisible hand of government creating an illusion and delaying what is necessary for this country to be an economic leader.

In the mean-time we see our government has now exported solutions like the TARP to Europe in the form of IMF funding (we are 17% of the IMF) loaning money and making swap lines available to the EU, IMF, and ailing nations.  Isn't it great that you didn't have a say in how your money would be frittered away?

As yesterday's announcement was made the EURO seemed to come alive and vaulted higher on the news that Greece and other ailing nations would be bailed out.  The ECB and IMF will directly support (buy) bonds of these bankrupt nations and prevent them from falling in price (sound familiar?- the US says that it just stopped doing that but we know that Japan is now doing it as well).  By buying the bonds in the open market it distorts the real price of bonds so it hides the real  or appropriate cost of the risk, and also allows the ailing country to continue to roll its expiring debt.    So, essentially the ECB and IMF basically are allowing the lies that European nations are actually worthy to lend money to --- to go on.  And of course, we're lending them more money when borrowed money is actually the problem.

There was only one problem with how things worked out yesterday.  The EURO fell apart at the end of the day and ended exactly the same way it had at the beginning.  Essentially traders didn't buy the whole buyout and bailout and think that this doesn't do anything but buy these countries a few more months or a year.  Traders are putting their money down shorting the Euro.  Rumors are being posted that the banks in Europe are actually shorting the Euro too!  Isn't that great, we're essentially bailing them out by buying sovereign debt of countries (which they hold on their balance sheets) and they are shorting the Euro knowing that it will continue to fall.   The act of shorting continues the problem and continues to make it fall!

So to summarize, the bailout added more debt as a solution for too much debt.  The US taxpayer has no say in giving away money that is doomed not to be repaid and the bankers in Europe are going to make money on failing as they bet that they will fail!

Gold and silver are tipping us off too that the market believes this is either going to be a collapse where metals will be the only thing worth anything or they are betting that this is inflationary and the metals are going to go up as inflation kicks in.  Here is a chart I'm watching on SLV.  I hate buying anything when it it is near highs, but it is clearly breaking out to the upside.

No matter what, I think we will rise, but again, I'm leaning toward the idea that we retest 10250 again on the DOW.  I'll put up some charts and show why I believe that, but no matter what, I'm going to bet that many Joe 6-Packs just take their money out of the market and let the computers eat each other alive.  This market is insane and not based on fundamentals, just market moving stories strung together, which is hard to trade.

GOATMUG