With the extra hour of the time change, I have some time to type up some market thoughts. The old IBM had signs at all their offices "THINK," though for some that extra hour may be used for "DRINK." Cheers.
The hunt for yield, or capital appreciation, has folks moving mountains of cash into stocks, precious metals. The long bonds have taken a hit, though the shorter durations such as 2-year notes are still at the highs.
The Fed's QE2 and how bonds have responded, reminds me of when the Bank of England decided to sell off some of their gold reserves back in 1999/2000. By announcing the size before selling, they got some of the worst gold prices ever. The open question is whether the Fed is getting a similar deal as it buys bonds and notes, by announcing how much and when it is going to buy? The trick part is that there may be a QE3 and 4, and as many sequels as some movie titles get. So shorting bonds (or being long bonds) can be a rollercoaster ride--it certainly was this past week.
I think precious metals still point higher. I haven't seen much excitement at the public level, that often comes at intermediate term tops. Mostly I see caution. Caution isn't abundant at major tops for any market, or if the cautious majority turn out to be correct, they turned cautious about 30% or so too early in terms of price.
Bonds are split. HYG (junk bond ETF) rallied this past week, while TLT (20 year Treasury ETF) got crushed in a wild week. Seems like being net short the 20-year is the percentage play now, which is a reversal of what I've been doing most of this year.
I think stocks are in for some turbulence, but a big market down move seems extremely unlikely. With option premiums moving lower and lower, selling premium becomes less rewarding. I am even contemplating some longshots (lower probability trades with a high potential pay out) on the short side, such as bearish vertical SPY put spreads out to January.
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