Although the U.S. Government has thrown an estimated $8.5 trillion so far into bailout measures and credit stimulus, this huge sum has yet to produce even a mote of tangible success. The goal for nearly two years has been to stabilize home values, but instead they have continued to fall. Policymakers and economists must be perplexed by this, even if beleaguered homeowners are not. Maybe the latter have remained gimlet-eyed because they’ve received only bailout crumbs to date. Whatever the case, at a time when households have become properly obsessed with repairing their balance sheets, who could blame them for being suspicious of Big Government’s so far fruitless collusion with the corrupt likes of J.P. Morgan and Goldman Sachs? Even so, a government rescue of individual homeowners cannot be ruled out. Our friend Jim Willy of GoldenJackass.com thinks it’s inevitable, and he expects the Government to attempt it in 2009 by way of a new Resolution Trust Corp that would put a floor under home prices. The agency would channel enough printing-press money to lenders to allow them to write down mortgage receivables significantly. We’ll concede that such a plan might extricate homeowners from an otherwise bottomless hell-hole of deflation. However, we do not see the enactment of such a plan as inevitable, since letting homeowners off the hook with an ocean of printing press money would simultaneously wipe out lenders on the other side of the mortgage equation. On that day, bond markets would collapse along with the dollar, and only hoarders of physical bullion would likely escape ruin. On that last point, we agree completely with Jim. But there is one point on which we disagree �' i.e., the matter of whether the global financial system is experiencing deflation, or, rather, what Jim calls “liquidation.” He sees liquidation
Monday, December 29, 2008
February Gold (886.50)
– Posted in: Current Touts Free Rick's PicksGold was moving effortlessly higher Sunday night after doing all that we had asked of it on Friday. The nearest resistance lies at 901.00, a Hidden Pivot, but a decisive move through it would imply a run-up over the near term to at least 972.20. There appeared to be few handholds for night owls to get long, but I'd suggest looking on the 3- or even 1-minute chart for opportunities at retracement midpoints.
March Silver (10.850)
– Posted in: Current Touts Free Rick's PicksA Hidden Pivot resistance at 12.658 is equivalent to the bullish target given for February Gold. Minimum upside for the next day or so would be to 11.345, its sibling midpoint. As always, an easy move through either of those numbers would suggest that still higher prices are imminent.
E-Mini S&P (859.00)
– Posted in: Current Touts Free Rick's PicksThe futures have been struggling too hard to pull back to an 852.75 midpoint suopport flagged here earlier, so we should look for them to move higher this week. Even so, you could bottom-fish at 852.75 with a stop-loss as tight as 1.00 point; or at 827.25 if the selling further intensifies to an unexpected degree. _______ UPDATE: Cancel any bids at 852.75, since we've already seen a so-far 11-point bounce from 853.25. I'm tempted to infer that my targets for this vehicle are getting front-run. A possible solution would be to publish the actual targets in the chat room just before they are hit. That would keep them from circulating much beyond Rick's Picks' subscribers. Please note that the 827.25 target would become an odds-on bet if the 852.75 pivot is decisively breached, or the futures close below it.
NEM Newmont Mining (40.49)
– Posted in: Current Touts Free Rick's PicksI assiduously avoid market-on-open orders, since they leave the retail customer vulnerable when predators are most easily able to manipulate option prices. However, we should try to buy some March 45 calls (NEMCI) in the 2.60-2.80 range today, provided the underlying stock does not fall below 39.00 (in which case we would bring our bid down commensurately). From a Hidden Pivot perspective, it looks like clear sailing to at least 43.50, a midpoint resistance derived from the daily chart. _______ UPDATE: Newmont was very strong, and so the calls traded no lower than 3.05. Stay tuned as we look for weakness, since the stock is on our short list of buys.
