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Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Thursday, July 11, 2013

Thoughts On Bernanke & Selected Markets

Well, as suggested on 7/8 (below), Bernanke did round on the monetary policy hawks
with a defense of his views. By my hard nose standards, it was a wimpy riposte, but the
markets loved it, with stocks jumping to a new high and gold in strengthening rebound
mode. QE remains in place for now, but remains in play politically as the Board is
strongly divided over its future. Gentleman Ben battles the sharks.

The SPX has made a new high. The short term indicators are positive, but the market
is again heftily overbought on a 6+ months basis and is subject to the possibility of
a "secondary" or rebound top as seen back in the Spring of 2011. SPX Daily Chart

The bull leg in place since Half 2'  2011 remains in place and is once again getting
very extended, enough so that more shorts will be invited in if the SPX can move up
closer to the 1700 level.

The fundamental environment is far from ideal. Monetary liquidity is strongly positive,
short term interest rates are negligible, and inflation pressure is low. All to the good. But,
the progress of business sales and operating internal cash flows and earnings remains
scant in a slow growth global economy. With liquidity carrying the day, the SPX is
gliding into overvalued territory, leaving stock price momentum to pull even extra duty.
Some players are comfortable with this and some are not, like me.

By sheer luck, on 6/27 (below) I switched from a negative view of the gold price to a
more balanced view. The future was down around the $1200 oz. level then, and after
a retest, there has been a nice rebound. Assets have powerful occasional bounces in deep
bear markets, and maybe I'll catch the gold train on the long side when the indicators
turn trend positive. Gold Daily Chart

The long Treasury is back on the radar, but like gold, it would be nice to see some repair
in the indicators. $USB Bond Price

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