Debt ceiling; UST bond ratings

Moody's follows S&P in putting US bonds on watch negative.  However, they state that this is specifically related to any possible inability to raise the debt ceiling.

I have complete confidence that our gov't will figure out a last second solution for raising the ceiling.  That's simply how negotiations go... the vast majority of standoffs get done at the last second.  Also, there are so many possible workarounds to avoid default, it's not even funny.  So in that sense, I will be looking to make a bet on no-default as we increasingly approach a deadline.

However, in the longer-term sense, it's interesting to see the market finally start to see the big macro events unfolding... one day, US debt could easily be in the same situation as Greece is now.

It was very funny listening to Bernanke respond to Ron Paul's question about whether Bernanke considers gold to be money.  Bernanke's job is to keep foreigners buying USTs and USDs for as long as possible rather than gold/silver, so obviously he has to deny that gold is money while no doubt knowing the opposite to be true.  Bernanke's not an idiot... his position is political.

Gold/silver

Today Bernanke got the ball rolling on rumors of QE3, as he knows our economy still doesn't look that hot (driven by continued low housing prices and high home inventory overhang, which will likely keep prices low for awhile).  This may spark the next upleg in gold and silver.  GDX, a gold miner stock ETF, after diverging below gold, has now been catching back up.  This is what Soros had recently replaced his gold holdings with.

Good article summing up why I'm so gung-ho about long gold & silver right now

http://www.bloomberg.com/news/2010-11-22/soros-gold-bubble-expanding-as-etps-hold-9-years-of-u-s-output.html

Soros explained it well, saying we are actually experiencing deflation while everyone fears deflation.  Pento is also smart in saying that the bull trend will not end until real interest rates are positive.  People like to call gold an "inflation hedge," but the data actually shows that gold performs well when US interest rates are kept low, and poorly when US interest rates are increased to counteract actually high inflation.  People point at particular things, like the recent rise in commodity prices, to say that we are experiencing inflation.  There is much more to inflation than commodity prices.  Specifically, housing, which is a huge component of actual prices, remains dismal, and there is a big output gap with all the unemployed.

Yes, gold and silver are the next bubble.  That is why you should buy it.  Your job as a trader/investor is not to pick tops or bottoms.  The trend is your friend.  Long!

Killed it on short TLT, long GLD plan for QE2 announcement

Wow, news was to buy even more long-term T-bonds than expected, and T-bonds still got railed.  Classic "sell the new" play.  Imagine how much I would have made if they talked more about easing in other ways!

Silver squeeze may be imminent

In the past couple years, I've read much about the supposed shortage of silver, and run through official government websites to see who's holding most of the open short interest in silver and gold, and came to basically the same conclusion as the gold and silver bug conspiracy theorists about commercial bank-dealers (specifically, JP Morgan) holding huge size short.

Now I read an interesting rumor about some other major players possibly going for blood.  http://www.zerohedge.com/article/are-asian-traders-preparing-major-squeeze-silver-shorts

Should be an interesting market going forward.  As expressed earlier, my opinion is that economic fundamentals support a much bigger move upward in the coming years anyway.

Sitting pretty

Re: the trade I posted previously (Uptrending Equity: TSLA option arb),  the interest rates on the borrowed shorts are falling off a cliff every day now, so the negative carry is dropping sharply while the implied volatility disparities between calls and puts is also dropping sharply.  Making me a bunch of money every day now.  


The VXX short/ BGU short pair has also been bringing in money for me nearly every day.  Still holding since Oct futures contango is also high.


Given Japan's decision to intervene in currency markets, other central banks with depressed economies may decide to compete to debase their own currencies, which will continue to be good for gold, which just hit new highs recently.  Gold to the moon!