Warning, Warning: Fed Tapering, Gold and The Hindenburg Omen (A 1987 Redux?)

Confounded Interest ^ | 08/10/2013 | Anthony B. Sanders

[whitedog57]

The stock market has experienced a fantastic run with the advent of quantitative easing (QE) policies by The Fed. Here is a chart of the S&P 500 index versus the Fed Funds Target rate.

spxfed20`13

But The Hindenburg Omen* oracles (like Mark Faber) are coming out with warnings of a 20% drop in the SPX. To be sure, the Hindenburg Omen is flashing red … again.

homentoday

Will this be a redux of the 1987 stock market crash (as Mark Faber claims) when The Fed jumped in after the crash?

spx1987

Or will it be a gradual decline like gold?

gold080913

Of course, The Fed has been signalling possible tapering of monetary easing. And the bid to cover on 10 year and 30 year Treasuries at this week’s auction show a decline in investor interest in Treasuries.

bidcov080713

In fact, the 30 year Treasury bid to cover is the 2nd worst read since February 2009.

30yrbcover

Even the PIMCO (Bill Gross) total return fund has gotten hammered, particularly since May 1st.

pimcotr

So, the Hindenburg Omen is flashing red and Treasury auction bid to cover ratios are also flashing red. Let’s see what happens.

Hindenburg

[whitedog57]

Warning Will Robinson! Investors are losing interest in Treasuries which will equal rising interest rates.

[Vince Ferrer]

We may see a correction soon, but it will be short lived. There is a lot of money outside the US looking for a safe place, and the US looks like a bargain to the rest of the world.

After the German elections in September especially. Things will heat up in Europe.

[logic101.net]

A few months ago I put everything into T bills. Why?

1) QE is the main reason for the price rise
2) They kept talking about “records” when the underlying economy is not strong.
3) I kept hearing Warren Buffet in my head saying: “When people are greedy be fearful...”

Admittedly, I got out too early, but now I’m just waiting for the crash so I can step in and find some bargains.

[xzins]

Lower bonds = lower interest rates??? That’s what I always thought.

In any case, it’s the nervousness about stocks that the issue. If the Fed eases, then the stock market bubble will burst, the interest rate bubble will burst, the inflation bubble will burst, and the economy will tank while the government payment on the debt will double or triple proportional to the interest rate increase.

That’s why Bernanke & Crew are only playing verbal games to try to keep interest rates a bit higher for long term bank profit/protection.

Savings/CD rates are extremely stable suggesting no dramatic changes in interest or inflation.

[Vermont Lt]

Bond prices have an inverse relationship to interest rates. The prices have been pretty high, and they will go Dow. When the interest rate on the ten year note starts moving up, that is when the fun begins.