I started building positions in gold and silver bullion on weakness yesterday and today, hedging them with short stocks positions and long volatility in the VIX.
As of today, the adults have left the building and the kids are managing the desks. So I do not expect anything profound before January unless there is some exogenous development. Volumes are thin and liquidity is plentiful.
A massive shift in fund flows has been underway among individual investors since the 'flash crash' as they flee US bond and equity funds in favor of offshore investments, gold, silver, and other commodities.
Charles Biderman, CEO of TrimTabs Investment Research, has the details and a theory that QE2 is supplying the liquidity to support US stocks at artificially high prices. Biderman says that the government is 'rigging the market.' He wonders what will happen when this monetary support falters. I myself wonder if the TBTF banks are using the Fed monies to build up assets in a pyramid scheme that will do further damage to institutional monies like 401k, insurance, and pension funds. Typically in Ponzi schemes there is a violent market correction back to a sustainable equilibrium.
Could Wall Street peddle fraudulent instruments and cause serious damage to the real economy in order to line their own pockets with fees and bonuses while the government and regulators look the other way?
Uh, how do you think you got here in the first place? Nothing has really changed as a consequence of the failure to reform and allow the system to take its losses. All the individual can do in such an environment of insider trading and artificial pricing is to protect themselves, which is what it appears many individual US investors are doing by shunning US funny money paper and placing their wealth in safer investments overseas, in commodities, and precious metals if Mr. Biderman has his facts straight.
Yes, there is plenty of short term, high risk, cynical money to be made in US equities as in any pyramid scheme while it is building. But one has to know when to get out with a profit. It will be hard to beat the pros to the exits when the time comes.
Following the Fund Flows - Charles Biderman of TrimTabs on CNBC
Airtime: Thurs. Dec. 23 2010 | 4:13 PM ET
So let's see what happens.
