September 18th, 2014
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From the monthly archives:

August 2009

Why a Default on Treasurys Is Likely

by Rick Ackerman on August 31, 2009 8:24 pm GMT

Jeffrey Rogers Hummel has written one of the most provocative and insightful essays I have read concerning why the U.S. is more likely to default than attempt to hyperinflate Treasury debt into insignificance.  Click here  to access the essay. Here’s an excerpt:

It is not literally impossible that the Federal Reserve could unleash the Zimbabwe option and repudiate the national debt indirectly through hyperinflation, rather than have the Treasury repudiate it directly. But my guess is that, faced with the alternatives of seeing both the dollar and the debt become worthless or defaulting on the debt while saving the dollar, the U.S. government will choose the latter. Treasury securities are second-order claims to central-bank-issued dollars. Although both may be ultimately backed by the power of taxation, that in no way prevents government from discriminating between the priority of the claims. After the American Revolution, the United States repudiated its paper money and yet successfully honored its debt (in gold). It is true that fiat money, as opposed to a gold standard, makes it harder to separate the fate of a government’s money from that of its debt. But Russia in 1998 is just one recent example of a government choosing partial debt repudiation over a complete collapse of its fiat currency.”

From Theodore Dalrymple, writing in City Journal, an eloquent and insightful essay about how an age of loose money not only destroys savings, but also corrodes character.  Click here   for the full essay. An excerpt:

But asset inflation—ultimately, the debasement of the currency—as the principal source of wealth corrodes the character of people. It not only undermines the traditional bourgeois virtues but makes them ridiculous and even reverses them. Prudence becomes imprudence, thrift becomes improvidence, sobriety becomes mean-spiritedness, modesty becomes lack of ambition, self-control becomes betrayal of the inner self, patience becomes lack of foresight, steadiness becomes inflexibility: all that was wisdom becomes foolishness. And circumstances force almost everyone to join in the dance.”

Is Nikkei Predicting U.S. Stock Rally?

by Rick Ackerman on August 31, 2009 7:11 am GMT

Stock-chart overlays almost invariably stop working when we have them called to our attention in an e-mail, but it must be conceded that S&P 500 does look to be closely following a trail blazed by the Nikkei 225. If the coincident patterns continue, it would imply that the U.S. bear rally begun in November is just starting to get airborne. Click here  to see the comparison.

ESU09 – E-Mini S&P (Last:1016.50)

by Rick Ackerman on August 31, 2009 4:11 am GMT

I suggest looking for a camouflage entry opportunity if and when the futures hit 1034.00. That’s the midpoint resistance of a pattern projecting to 1046.00.  The opportunity could come Sunday night or in the first minutes of Monday’s session, so be ready! _______ UPDATE (10:45 a.m.): The futures got no higher than 1031.00, failing to trigger our buy signal. The low was 1013.25, suggesting that the sleazeballs who run this carny game have somewhat more than the usual amount of Monday morning selling to deal with before they take stocks higher again.

Gold did all we asked of it Friday and now looks like a good bet to achieve a minimum 978.00.  The target is shown in the 180-minute bar chart at left. If the futures are indeed ready to move, any correction Sunday night or Monday morning should hold at or near the 954.70 midpoint shown in the chart.

MPUCF – Moneta Porcupine (Last:0.1490)

by Rick Ackerman on August 31, 2009 3:46 am GMT

We missed buying the stock last week, but it may be ready to head lower than originally forecast. To prepare for this possibility let’s bid 0.1150 for 5000 shares. That’s just above a Hidden Pivot support at 0.1148 that looks like a logical place for a bullish reversal. _______ UPDATE: Cancel the bid for now, since Moneta has moved out of range.

GS – Goldman Sachs (Last:164.33)

by Rick Ackerman on August 31, 2009 3:40 am GMT

We hold the Jan 130 – Oct 130 put spread four times for 3.40 and are long one September 170 call acquired on Friday for 2.00. This is a very slight backspread, with moderate premium exposure over the next three weeks. Our goal is to sell the call on a quick pop to reduce the carrying cost of the put spread. The call also makes us approximately delta neutral — long the equivalent overall of about five shares of stock.  Goldman looks like it could push up to 170.19 if it can get past a lesser Hidden Pivot resistance at 166.40.

SLW – Silver Wheaton (Last:10.50)

by Rick Ackerman on August 31, 2009 3:31 am GMT

We hold 16 December 12.50 calls for an average 0.45 apiece.  Offer half of them to close for 0.75, good-till-canceled.  You should also offer eight December 15 calls short for 0.45,  good-till-canceled. My immediate upside target is 10.73, but if the stock closes above that Hidden Pivot for two consecutive days it would be signaling further potential to as high as 12.43 over the next 3 to 5 weeks.

Bullion’s Bullishness

by Rick Ackerman on August 31, 2009 12:01 am GMT

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Ultimate Bottom Lies Far Below

by Rick Ackerman on August 31, 2009 12:01 am GMT · 5 comments

Because we never shared investors’ wild enthusiasm for Cerberus, its near-collapse in recent days hardly came as a shock. The once-huge private-equity firm specialized in distressed assets at a time when even the bluest of blue-chip companies – the name Lehman Brothers springs to mind – have fallen into mortal peril literally overnight. Cerberus’s biggest gambles were in GMAC and Chrysler. The latter company’s future looked as bleak to us five years ago as it did in May, when the automaker went belly-up. What could » Read the full article