I missed out on predicting most of the month of March due to my spring break being right in the middle of the month. However, I can finally come to my weekly article with rest and confidence as many of my predictions have, to my surprise, eerily come true all too soon. I’d like to remind everyone why it is so important to make general predictions. As I said about a month ago: if you know where you are going, you know what to expect on the way there. Right now, the Market is using an old map to get to a place they’ve never been before (15,000 on the Dow).
- CORRECT: An inter meeting fed cut is likely to occur or a dramatic fed cut during the meeting (75 basis point).
- This could be put on hold as inflation concerns, due to the weak dollar, underscore Fed moves. But now we know the Fed could give a rat’s ass about inflation.
- I think it’s interesting how the market FINALLY agrees with me. It took them long enough. I’ve been saying this for the past month.
- This could be put on hold as inflation concerns, due to the weak dollar, underscore Fed moves. But now we know the Fed could give a rat’s ass about inflation.
Comment on the Prediction:
When everyone said 50 basis point cut, I said 75. When everyone said 100 basis point cut, I said 75. Remember, I said 75 basis point cut back in the beginning of February, so that is foresight. I also put the bond ETF TLT in my original crash portfolio due to this prediction and it has outperformed all other bond ETFs out there. That is amazing. Why didn’t I go with a 100 basis point cut? Strategy. If the Fed cut 100 basis points, it would lose 25 basis points of future “ammunition,” as it is being called nowadays. Furthermore, giving the market less than what they expected is a bullish sign. It is the Fed telling the market, “things aren’t as bad as you think, really.” However, anyone that knows anything knows that completely false.
- CORRECT: The next time we drop to 12,000 we won’t stop there.
- It just might be this week! If we don’t get there within two-three weeks, I don’t think we’ll test new lows.
- All the cool kids on the block are talking about, “testing new lows.” The Market is simply comprised a bunch of followers.
- It just might be this week! If we don’t get there within two-three weeks, I don’t think we’ll test new lows.
Comment on Prediction:
I hit this right on the nose again. I’m even amazed how accurate the time frame I gave was. I said on March 3rd that we could be seeing new lows within the week and said that if we didn’t cross that 12000 barrier within the next weeks, we wouldn’t test the lows. Now, two weeks later, it just so happened that we retested the lows within the week. Then, I advised wrote about why I was buying Apple call options by the end of the week because we would be seeing a rising market in the near future.
- CORRECT: Further U.S. government bailouts (possible nationalization of some type).
- Good old BoA is already petitioning hard.
- UBS has come out and said that the first nationalization will happen before October. Realize he says there is a possible $ 1 TRILLION dollar melt down. Again, the street is way either way behind on this or they are stealing the money of those individual bull investors.
- Good old BoA is already petitioning hard.
Comment on Prediction:
No one thought the first bailout would come so soon with Bear Stearns. However, do not expect this to be the end.
- CORRECT: TAF loans are here to stay until at least December.
- The Fed has announced $60 billion in TAF loans for March. Again, just like I’ve been saying.
- Without the TAF loans, we would see a significant rise in cost of capital.
- The Fed has announced $60 billion in TAF loans for March. Again, just like I’ve been saying.
Comment of the Prediction:
I didn’t see this as the intermeeting action, but it makes a lot of sense. However, my prediction that the TAF loans would become more important is now clear. The Fed even one up-ed me by extending the discount window to investment banks. What I love about this prediction is that two days before it was announced I wrote that Apple would be going up since the last time I saw Apple at 113, the cut rates intermeeting. Whatever action the Fed takes is not really important. All that matters is that the Fed take action and the market receive it as good news.
Things that have yet to happen:
- Smaller banks will start to really feel the pain, declare bankruptcy, shortly after commercial real estate collapses.
- With H.3 data getting worse and worse there is no end in sight.
- The Wall Street Journal is finally talking about it! Again, I’ve been weeks ahead on that one. Truth be told, it was Mish at Global Economics’s Blog that informed me about it. He is LIGHT YEARS ahead of the Street.
- With H.3 data getting worse and worse there is no end in sight.
Comment on Prediction:
If you think I’m crazy, well then Bernanke is just as crazy. On March 11th, he opened the TAF loans program to commercial banks with commercial real estate collateral. Why would he do this if he weren’t expecting a commercial real estate bubble collapse?
- We will see 1% fed funds rate before summer’s end.
- Again, same as above. If the Fed does decide not to cut rates, then it will worsen the financial crisis as banks will not be able to lower their cost of capital.
- Again, same as above. If the Fed does decide not to cut rates, then it will worsen the financial crisis as banks will not be able to lower their cost of capital.
Comment on the Prediction:
Everyone right now is saying that the Fed will stop cutting rates. Every signal right now indicates a bull market rally, which I called on March 7th, when I sold all my puts and increased upside exposure to the market by buying deep out of the money options. Sure, for now it seems like the Fed is done, but we have not even started to deal with the commercial real estate bubble burst or the credit default swap tsunami. So expect much lower interest rates. My guess is we could see two 50 point cuts or a 75 and 50 basis point cut. So yeah, I’m saying 1.25% or 1.00% Fed Funds rate.
- Non Borrowed Reserves will become as important as the fed funds rate or discount rate.
- I don’t think anyone was expecting Non Borrowed Reserves to stay consistently negative.
- I will take credit for this: I brought Non Borrowed Reserves to Wall Street. Before that people were focusing on Net Borrowed Reserves. I’ll be posting the email I sent out to a colleague of mine.
- I don’t think anyone was expecting Non Borrowed Reserves to stay consistently negative.
Comment on Prediction:
I will recant the, “I brought Non Borrowed Reserves to Wall Street,” since many people before me were talking about the exact same thing. However, I did set off a round of articles written about my research in the blogosphere and major news sources like Bloomberg and the Wall Street journal. However, No one quite understands the significance of Non Borrowed Reserves. The last time they were this depleted was during the Great Depression.
- Credit Default Swaps will result in further write downs.
- JP Morgan alone has $7 trillion riding on these things.
- By the way, the whole bond insurer thing is because of Credit Default Swaps. That was the insurance that they can’t pay back.
- JP Morgan alone has $7 trillion riding on these things.
- Precious Metals will soar once the market crashes.
- Gold will beat $1500 an ounce by year end
- Silver will be at $30 an ounce by year end
- Gold will beat $1500 an ounce by year end
- Commodities will also soar once the market crashes.
- “Stagflation,” “inflationary depression:” call it what you want to call it. This, along with the metals, is a play on global inflation. That’s why the markt is retarded. Sure things look expensive now, but when the dollar goes to shit and oil sees a dramatic run up in price, I’m going to be laughing my ass off.
- “Stagflation,” “inflationary depression:” call it what you want to call it. This, along with the metals, is a play on global inflation. That’s why the markt is retarded. Sure things look expensive now, but when the dollar goes to shit and oil sees a dramatic run up in price, I’m going to be laughing my ass off.
Comment on Predictions:
The market has set the stage for one of the greatest straddle opportunities in recent memories. However, I will be probably selling my commodities and gold positions and going cash since it only matters what the market thinks will happen.