O-Shit, O-bama

So, the rumor on Bloomberg is that Obama is going to announce 3-years of government budget austerity to lower the deficit. Are you kidding me? How many Americans care about the deficit? There are no jobs, no opportunity, and gas prices are back over $3/gallon.

Oh, and congress is going to cooperate with the President with this? Really. This is the most bold-faced lie I've ever seen. I'll be a monkey's uncle's piece of poo-poo if this bill gets past, doesn't have more holes than Swiss cheese, and actually works.

And Lacker from the Fed is talking to Bloomberg about how the real Fed policy now is not the discount rate, but the rate the Fed pays to banks on reserves. Why does the Fed need to pay on reserves? Because Treasuries pay nothing! Nothing! Nothing!

Which, incidentally, is an0ther thing pissing off anyone trying to save for retirement in a safe and risk-averse manner.

Trade

Buy to cover: ANF @ $30.47, +18%.

Update

Well, after last week's 5% drubbing of the equity market, I think it's time to evaluate my positions on a technical basis. In fact, at the end of last week, the S&P, Dow, Dollar, and gold all stopped right at support or resistance levels.

The retail shorts have done me very well, with ANF now at a 20-25% profit. It's down from $38 to $30. I'm going to look at taking a couple of short-term profits. I can hang on to the rest of my shorts if the market breaks down, or go back in if it powers higher.

As far as news goes, Tishman-Speyer has defaulted on Stuyvesant Town. That's $4.4 billion in CRE mortgage debt that's going to take a 50%+ loss.

China's property bubble picked up steam in December, with property prices rising the most in a year and a half. Also, inflation is starting to rear its head in China. I don't doubt that the PBC will fight inflation. Unemployment angers people who don't have a job. But inflation will also cause unrest among those who do as well.

There's some interesting news in the bond market. In a sign that the U.S. consumer is clearly the leading edge of the Treausury-purchasing machine called China, China accounted for only 5% of U.S. funding in 2009, down from 50% in 2006. In fact, in the second half of last year, they were net sellers, and the market has held up well.
Also, the futures market still shows a chance of tightening by the Fed later this year. I don't believe it, and will close my bond position either when new info causes me to rethink that belief or when market sentiment swings back towards expectations of further easing.

Hacker Attacks

Chinese hacker attacks are not being reported right and left. First Google, then Yahoo. I wonder if the administration will use this to pursue a trade war with China. My feeling is that most people have a gut-level reaction of anger against hacker attacks similar to terrorists. If this becomes a media blitz to sway public opinion, I would not be surprised.

In other news, the Obama administration has finally priced their moral-hazard bailout protection racket for Wall Street at $90 billion over ten years. In other words, pennies on the dollar. The taxpayers get a couple of pennies, and TRAP will be declared a huge success.

And finally, Obama has given up trying to "sell" ObamaCare. Nobody's talking about it any more. But they're still trying to sneak it down our throats anyway. Our best hope is that the house changes the bill enough that it has to go back to the Senate.

And in economic, not political news, global oil consumption has not rebounded, yet VLCC tanker rates are now at $60k/day, up from $12 last year. My guess is that this comes as a result of a crunch on available tankers for storage. Now the storage can be hedged or it can be speculative. The futures market is still in contango, with the February 2010 contract at $85.50, a 7.7% premium to Feb. '09. If this market goes into backwardation, the specs will have to dump to cut losses, and the price will tumble. U.S. crude stocks recently jumped higher. If the weather turns warmer, this could factor in as well. Unfortunately, this is hard to play. I don't want to buy DUG, because of the built-in time-decay loss. Shorting DIG is impossible, as it is hard to borrow. Option volatility is over 50 for both of them, making them too expensive. I'll just have to watch and see if they settle down. Volatility on USO is "only" about 35, so maybe that will give me a better option.

General Bernanke

I'm thinking about how the world economy looks from the viewpoint of economic warfare. In this vein, Fed policy statements are strictly misinformation. U.S. policy consists of devaluing the dollar to pay off foreign debts. Policy will be changed to reverse the outflow of capital by U.S. corporations. I couldn't find data on Chinese manufacturers of steel pipe that tariffs were just slapped on, but the tire tariffs fall almost entirely on U.S. companies that built factories in China. Just maybe, those tariffs are a message to U.S. companies not to build any more in China.

Devaluing the dollar would seem to be a great way to pay off U.S. debts easily. Unfortunately, China is our largest debtor. Their currency peg means that we cannot devalue against the Renminbi. But Bernanke and Geithner can see that devaluing the dollar is causing inflation in China. So they are quietly setting the stage for the attack. How? They are shutting down U.S. dollar flows to China. Devaluing the dollar is one way of doing this. If China doesn't revalue upwards, then Japan and Europe will pressure them to, and enact protectionary measures if needed. So Bernanke can count on Europe and Japan to help. So if China can be forced to revalue the Renminbi upwards, then the U.S. gets to pay off the debt with new dollars. On the other hand, if China devalues the Renminbi with overstimulation, inflation will go sky-high, interest rates will have to be raised, and China will have to sell their U.S. bonds. Of course, the Fed will step in and buy. Prices will be frozen to keep rates low, but the Fed will be able to buy just by printing. And this should be good for gold.

Most of this is speculation and very fuzzy and blurry in my mind. But maybe it will give me some good ideas. I'm only fairly sure of two things here: first, Bernanke will reinstate quantitative easing. Second, this should be good for gold.