Major shift in sentiment on this board

[beerbaron]

Anyone see the 30 yr rates?  Man, they have jumped in the past month.  It's the first time I've seen the 30 yr rates hit over 5% in a while.  Historically, we're just reverting to the mean.  However, mean reversion requires an overshoot to the average.  So, will we see 8.5% 30 yr rates?  Will the Fed be able to monetize debt?  I think anything above 6.5% and the housing market will get creamed. 

 

 

 

Nothing QE3 can't solve  >:(

 

BeerBaron

[Smazz]

I would just like to know where all this optimism in the markets is coming from.

I think Prem said it best a while back - something like, and im paraphrasing "we'll let the smarter people make the $ from here"

 

 

[Parsad]

You should see how nuts it is in the commodities and resource sector.  It's like the internet bubble!  A friggin' joke!

 

You want an easy way to make money right now in Vancouver?  Start a junior exploration company in gold or rare elements, get Canaccord or somebody to underwrite it, issue a bunch of options to yourself, your executives, family and friends, and then sit back!  You don't even have to have a real mineral property.  Just throw a couple of geologists onto your board and pay a few thousand dollars to some idiotic newsletter writer.

 

In the meantime, you can blow some of the capital raised in financing on management fees, consulting fees, travel, promotion and stock option expenses.  Perhaps, you can blow 80% of the raised financing on those things, and spend less than 10% in exploration like many juniors do!  And don't worry, once you're down to your last $100K, just go back to one of the underwriters here and they'll do a reverse split for you and re-underwrite the whole thing all over again. 

 

Hey, it's all part of the cost of doing business when you're in resource exploration!  Cheers!

[Smazz]

Interesting you brought up mining - though prob not exactly what you referring to but lets talk about GOLD.

Are (they) kidding me? HOW THE F$$$ Do you value gold? Seriously, who in their right mind would buy into Gold at $1000.

A friend of mine called me last week asking for some advice. Mentioned he made 40% in gold. In all fairness to him he wasnt bragging he's not one of those types. I asked him "what made you buy gold?"

Long story short he asked if i thought it was overvalued. I wanted to say "i would tell you if you could tell me how to value it".

He said "do you think its overvalued?" I said "it was probably over valued when before you bought it" ;D

Lets let the CSI guys make $ from here.

[Aberhound]

In China depositors get 3% interest. Food prices are over 40% of the CPI which now has had the food component reduced so understates inflation for the poor. With rents and food prices rising what is the real inflation rate? Over 10% certainly. Property prices are now at ridiculous multiples to earnings and the government is trying to drop prices by restricting lending and introducing property taxes. Money supply growth is about 25% per annum and peaked at 40% in 2009. Monetary policy has a two year lag so inflation will be a big problem in 2011. Savings rates are extremely high. Now the growth in the supply of labour is dropping and incomes are rising.

 

Buying gold seems to be the least risky option for these Chinese savers who have never believed in paper money and rising incomes means that demand will increase as there are more savings to invest and limited good choices of where to invest. China is where gold prices are being set now. To control inflation the government will be forced to let the Yuan rise which will drive up gold in dollar terms.

[Zorrofan]

Everyone seems to be quick to trash both gold & Sprott, but he has done 20% per year for the last ten years. With China buying gold and the US racing towards $24 trillion in debt can gold go anywhere but up in US $ terms?

 

cheers

Zorro

[Myth465]

This has me jittery as hell. My port is up 25% YTD and maybe 40% over the last 3 months. Alot of that is oil though. Perhaps time to take some chips off the table. Also considering a move to Oz interestingly enough.

 

http://finance.yahoo.com/tech-ticker/china's-economic-%22hard-landing%22--will-cause-a-commodity-crash,-says-gary-shilling-535929.html?tickers=fxi,eem,gld,copx,jjc,^dji,^gspc

[QLEAP]

Moved to 40% cash, we are due for a pullback anytime soon..

[Myth465]

Moved to 40% cash, we are due for a pullback anytime soon..

 

I feel trapped. I like my top 4 holdings which make up most of my capital. I wont sell them due to all of them being undervalued. I am selling off smaller fully value holdings but that wont protect me much.

 

I think we will stay overvalued for a while, and then gap down on bad news generated by China or Europe.

[ERICOPOLY]

I have an 18% gain YTD.  A lot of the portfolio is in large banks and SSW.  I see those holdings doing well in the next 18 months with the coming substantial dividend increases.  They are all historically cheap.  Then I have a basket of Harry & Packer's picks -- also cheap.

 

 

[QLEAP]

 

Yes, we can predict all we want but we will never know till it happens ! My port has run up quite a bit too and the cash makes me sleep well. I am hoping I don't get too antsy waiting for the pullback and do something stupid with the cash :)

[finetrader]

This article sums up what every investor think at this moment.

http://www.theglobeandmail.com/globe-investor/global-investors-flooding-into-equities-again/article1910566/

[Guest broxburnboy]

The markets are being bouyed by a flood of liquidity from the Fed and other central banks... the stated goal of QE  is to reflate the stock markets.. and it's working. Trouble is, the new cash is not from increasing productivity, but by monetizing deficits. Mainstream economists are begining to see what main street already knows..CP price inflation is increasing and aggregate incomes are down. The "recovery" is running on fumes. Interest rates are starting to rise, eventually (soon?) we'll have a market correction but only because the Fed needs to manufacture consent for more QE. Then the cycle begins anew.. more QE, Fed buys bonds to drop interest rates, stock market "recovers". investors rejoice over the official low CPI numbers while sipping 9.95 Starbucks and filling the Beemer with 6 buck gallon gas...inflation? what inflation?

[SharperDingaan]

 

You might want to keep in mind that Feb is RRSP deadline month in Canada, & that $ inflows have material seasonality. The major bad news story (Arab state revolution) has also bumped the worsening economic story - esp. Spain.

 

Good news sells, & pulls in more advertisng $ - bad news does not.

 

SD

 

[benhacker]

Stubble, (apologize for the delay, I continue to miss some messages as my RSS Reader doesn't display them all, or I'm an idiot)

 

I'm not sure that I understand.  I just compared a quick and dirty nominal earnings yield for the S&P to a nominal long bond yield, which gives a nominal spread that represents the equity risk premium.  I am quite open to the argument that nominal S&P earnings should have some growth, but the notional spread that I eye-balled is about 65% of the historical equity risk premium.  

 

If you tack on Sanj's point about risk free rates being historically low, you might come to the conclusion that this is not the best time to jump into the broad market.

 

Have I missed something?

 

SJ

 

I guess I am quibbling with the defintion of "nominal" earnings yield for stocks.  I would argue that such a figure (at least as you are thinking about it) does not exist.  Stocks are comprised fo real assets, and earnings are defiined as the level of income at which (on aggregate) you should be able to remove from a business and still maintain it's earnings.  Said differently, a busienss who pays out 100% of "income" should be able to grow with inflation.  On the aggregate for the market, this has been true over time (the earnings yield has been approximately = to the after inflation returns for the market which in a competative society is what you would expect as a businesses incremental returns are equal to returns on equity capital (dividend vs reinvestment on aggreagate is a wash) generally (competition exists).

 

Hope that makes sense.

 

Basically, I'm saying that by comparing earnings yield to bond yield, you are comparing a real return (forward looking) to a nominal return (forward looking).  Before we had as much of an inflationary monetary stance, this was no big deal, but now, I think it's a very important thing to realize.  None of this is to say whether stocks actually do well with inflation in the short run (they don't), or does it address your (rightful) concern about yields likely increasing, but it's a piece of data that I think is misunderstood, and very very important.

 

Thanks.

[DCG]

I've been watching CNBC most of the morning and like the amount of pessimism i'm seeing.

[Myth465]

6 weeks down will do that to you. I went all in early this week, plan on just taking a vacation. This too shall pass, though I am not sure how. ATSG is my favorite investment current, ROICW is the speculation of the month.

[Liberty]

I've got more ideas than cash right now. About half of my 8 portfolio stocks (my fave businesses right now) are cheap right now (other half are about fairly valued), and I'm getting tempted to add GOOG as a 9th if it keeps going down like that  :)

[ubuy2wron]

I took off my hedges last week and I have started to buy some stuff that looks interesting. I took off my hedges because the sentiment had clearly shifted mild concern had shifted to grave concern with a whiff of panic. The failure of a plausible short term solution in Greece however will make me wish I had not been so brave.