Federal Reserse Actions Save Banks But Deleverage Stocks And Deliver Gold
Thursday, 3. January 2008, 18:04:50
A comparison of the charts of the semiconductor ETF, SHM and the gold ETF, GLD serve to illustrate that the December 11, 2007 Federal Reserve actions of lowering interest rates and providing an auction process, deflated stocks and inflated gold.
Notice how semiconductors never recovered from the first subprime scare back in July; and sold off with thc Citicorp CDO Bust of October 8th, 2007; and then again after the Federal Reserve dropped money onto and into the banks in 'a helicopter like fashion' causing a deleveraging of stocks
There was a delayed response in the currency and commodity markets to the Fed's actions: it took ten days; on December 22 gold soared in response to the debasement of the U.S. dollar as currency traders drove up the Euro and then the Yen which forced the dollar down and gold up; the fact that gold is up more than the dollar is down, communicates that an investment demand for gold has arisen.
Investment Application
If you have been reading my blog, you know I strongly recommend a long gold and short stock investment strategy; and here is a database table of ths short components; and here is the Google Finance Chart of three ETFs (EES, PZI, IAT) in that strategy.
Notice how semiconductors never recovered from the first subprime scare back in July; and sold off with thc Citicorp CDO Bust of October 8th, 2007; and then again after the Federal Reserve dropped money onto and into the banks in 'a helicopter like fashion' causing a deleveraging of stocks
There was a delayed response in the currency and commodity markets to the Fed's actions: it took ten days; on December 22 gold soared in response to the debasement of the U.S. dollar as currency traders drove up the Euro and then the Yen which forced the dollar down and gold up; the fact that gold is up more than the dollar is down, communicates that an investment demand for gold has arisen.
Investment Application
If you have been reading my blog, you know I strongly recommend a long gold and short stock investment strategy; and here is a database table of ths short components; and here is the Google Finance Chart of three ETFs (EES, PZI, IAT) in that strategy.
WIDGETIZE