Finance Newsletters: Dan Stewart's The Wall Street Shuffle

A NorAm Media Group Publication - Celebrating our 53rd Anniversary

Tuesday, July 23, 2013

Summer Doldrums Before Earnings But Gold is Getting Interesting
by: Dan Stewart

The markets exhibited a lackluster, uneventful day Monday on the DOW and S&P 500. Both finished virtually neutral. During the summer we call this the Summer Doldrums.

...While buying enthusiasm wasn't particularly strong, neither was selling. The equity markets, however, are still in rally mode.

The strongest sector yesterday hands down was the miners and precious metals. Gold and silver were up 3% and 5.4% respectively. But some of the miners were up 7% or more. GDX, the Market Vectors Gold Miners ETF, gapped up at the open and was up over 6%, while GDXJ, the Market Vectors Junior Miners ETF, was up almost 9%.

Now GDX just broke above its 50 day moving average (50 DMA). If it can hold the 50 DMA, more investors than just value investors will enter the mining sector.

But it could get even much more interesting soon...

Tapering is Tightening
by: Michael Pento

The Fed is having a tantrum over trying to explain to the "misguided market" that tapering QE is not tightening monetary policy. As far as Mr. Bernanke is concerned, the Fed isn't tightening if the Fed Funds target rate isn't being increased. While I agree, unfortunately, with the Chairman that raising the Fed Funds target rate from its current zero percent range probably won't occur until there are two consecutive blue moons. However, I do not agree with him that lowering the level of monthly asset purchases shouldn't have any effect on long-term interest rates.

Our central bank believes the size of its $3.5 trillion balance sheet has the primary influence on money supply growth and level of asset prices (stock analysis). Nevertheless, the Fed maintains that it needs to increase its balance sheet and the amount of excess reserves to an even higher level in order to ensure financial institutions will supplant its purchases of debt once QE is wound down. However, I believe the consistent monthly amount of Treasury debt and Mortgage Backed Securities that the Fed purchases holds more sway in the decision by banks to accumulate more bonds (flow analysis)...