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Bob Janjuah On Picking Your Poison: A 1,350 Top In The S&P Or QE3, With A Change In The FX Regime And A Surge In Gold
From Nomura's Bob Janjuah
In Bob's World USDs are not welcome
My last report (The Sceptical Strategists: Time to fade Jackson Hole) was published nearly two months ago, and after another hectic travel schedule here is an update.
1 – Overall, the issues leading to the 2007-09 crises are still present, and are even worsening in some places. Namely very large global, regional, sectoral and national imbalances (in areas such as incomes, earnings, wealth, trade and financial health); excessive levels of, and excessively narrow concentrations of, debt primarily in Western economies; and significant fat tail risks in the market when it comes to the price of and the levels of assumed volatility. It seems that collectively we learnt nothing from the 2007-09 experience, and the apparent solution to the crisis has been to implement more of the same policies that caused the mess in the first place.
2 – Therefore, as we have said throughout the past four years, we think the key drivers of markets and economies are still the cost of capital (CoC) and balance sheet (BS) strength/financial health. The rising CoC over 2006-09 led to exactly what it always leads to: slower growth, weaker earnings and incomes, and ultimately a default cycle and poor risk asset performance. Since early 2009, primarily through quantitative easing (QE), the CoC fell and has been artificially mispriced in our view since then. This lower CoC also had the usual consequences: more leverage, more debt, and artificially supported, or mispriced, (risky) asset valuations.
3 – As we have discussed previously, the key current global macro themes occupying the market are still:
- In emerging markets (EM) will there be a soft or a hard landing? There is no doubt that a landing is needed in order to address inflation problems, excessive and speculative asset bubbles, approaching cyclical capex peaks, and very real labour squeezes/positive output gaps. But what sort of landing this will be remains to be seen.
- In developed markets (DM) we expect, for the next few years, lower trend growth rates. Already excessive debt levels have worsened, and we continue to expect a weak U-shaped recovery in domestic sectors overlaid by a temporary and highly cyclical super-cycle in manufacturing based largely on demand from the big three EM nations, the BICs (Brazil, India and China).
- In Europe, although we do eventually expect a credible and sustainable solution to Europe?s excessive debt/insufficient equity problem, we expect the crisis to continue for a while yet.
To the above three themes we can now add two more. Firstly, the outlook for Japan after the tragedy, and how it may impact the global economy and any global asset allocation. Second, Arabic unrest/oil price spikes and how such price moves are affecting growth and inflation in both the DM (where growth is the bigger risk), and the EM world (where, in energy and food, inflation is the bigger risk).
Other than the recent shock in Japan, all of the above are clear iterations of the issues discussed in (1) above. Nomura analysts are constantly assessing the shorter-term and medium-term impacts of the triple tragedy in Japan. Of course the nuclear problems are ongoing, but for the Sceptical Strategists the longer-term risk is that Japanese repatriation of its huge net overseas asset position may be hastened by these events. In this context even Japan is an iteration of the problems and issues summarised in (1). Japan has been one of the biggest current account surplus economies for decades, and has as a result been supplying the global economy, especially in the DM, with large amounts of cheap capital. If repatriation becomes a meaningful trend over the next five to ten years as Japan seeks to “service” its domestic deficit and significant (gross – for now the current net position is comfortable) debt burden, then this repatriation will cause the CoC to rise globally. Those predicting the collapse of the Japanese economy should realise that the West is not just addicted to cheap capital from Chinese excess savings/reserves or from the Fed. It has also, over the decades, become very reliant on Japan?s exports of capital!
4 – Our secular asset allocation theme is unchanged – a rising CoC period is, broadly, a risk-off phase, where the strongest BS entities (be they corporate, financial, government or consumer) should relatively (at least) outperform. A falling CoC phase is broadly about risk-on and favours the weakest BS entities. The period from 2007 to early 2009 was a rising CoC, risk-off phase. Early 2009 to the present has been a falling CoC, risk-on phase, albeit punctured by some brutal sell-offs that ultimately forced the Fed into QE2. We strongly believe that the next major secular trend, which will likely begin in 2011 and last through 2012 and maybe even into 2014, will be a rising CoC, risk-off phase where the weakest BS entities will underperform the most.
5 – We discussed at length our tactical asset allocation themes in our previous report two months ago, and we now update them. The first big call we made in late January was that the risk-on trade, expressed via global equity indices, would reach a top of some form in February; we set the S&P 500 target for this February top at 1330/1350. This has worked out well, with the S&P 500 peaking so far this year at 1344 on 18th February. We then expected a (minimum 10%) sell-off in risk assets, with the key risk periods likely to be March and/or April. This call has also worked out well. From the February highs global equity markets sold off close to 10% into the mid-March lows, with some markets well over 10% down but with the US major indices down a little less than 10%. Thereafter we saw two possible paths, either the soft landing path or the hard landing path:
- In the soft landing scenario, where we expect voluntary global policy tightening, driven by EM, we would expect 1350 S&P to act as a ceiling, and this sell-off to end with a 20% fall (from the February) peak to (the end-Q2) trough. Such a sell-off would in our view create a very positive TACTICAL buying opportunity for risk, as it would be the ideal “pause that refreshes” and would take the pressure off global commodity prices, the building global inflation risks, stretched risk asset valuations, and reduce the pressure on rising bond yields in DM.
- Under the hard landing scenario we would expect global policymakers to make even more policy mistakes by failing to tighten, and even more worryingly, by accommodating price shocks, especially in EM. Under this scenario we would expect the 1220 support level to hold for the S&P in Q2 2011, and we would look instead for another melt-up in risk assets over Q2 2011, with the S&P peaking at 1400/1440 by end-Q2. This then would be followed by a very difficult and bearish H2 2011 for risk, as the melt-up in commodities, valuations, expectations, sentiment, inflation, positioning and bond yields would together give the perfect backdrop for a severe hard landing in risk assets. Key here is that QE3 would be delayed until late 2011/early 2012 because of the extremely negative impact that the Fed’s QE2 has had on inflation (globally) and the significant concerns already building about the Fed’s credibility. We think QE3 is still likely, but judge that risk asset markets and the US economy (notably unemployment) will have to worsen considerably before the Fed can make a “credible” case and garner consensus support for QE3. Our view is that over H2 2011, under the hard landing scenario things will get a lot worse. It seems to us that very large amounts of debt and money printing are being used to “buy” a recovery which itself has no real legs (in particular as EM – the BICs – are forced to slow because of their domestic inflation, thus stopping dead the global manufacturing super-cycle which is the only real source of strong growth in the US). And once QE2 stops and other such stimuli are also turned off (fiscal boosts have already had their day, in our view) we think the emperor?s new clothes will be revealed for what they are. Although in this hard landing scenario, in the initial melt-up we think the S&P 500 could reach 1400/1440 by end-Q2, by end-2011 it could be below 1000.
All the evidence of the past few weeks points to the “melt-up then hard landing” path as being the most likely, although for now 1220 and 1350 are still holding, so we still see some hope – albeit diminishing rapidly – for the soft landing outcome. To reiterate, four consecutive S&P 500 closes above 1350 would to us signal the melt-up (1400/1440 S&P 500 by end Q2 2011), to be followed by the hard landing in H2 2011 (1000/sub-1000 S&P 500). Equally, if 1350 provides resistance and the S&P 500 trades below 1220 on four consecutive closes, then in this soft landing path we would expect to see low-1000s on the S&P 500 by end-Q2 2011. The big difference is that under the soft landing path, we would be buyers (tactically, into year-end) of the S&P 500 in the mid-1000s, expecting a bounce back to the 1300s by year-end. Under the hard landing path, a 1000 – even a sub-1000 – S&P 500 would likely not entice us back into high beta DM risk, even tactically, let alone on a secular basis.
6 – Why are we so bearish under the hard landing outcome? The key is that the policy tools needed to respond to a hard landing now are very limited, in our view, perhaps even non-existent in DM (EM/stronger BS nations, e.g. Brazil, Australia, still have plenty of policy flexibility/tools). In the UK and euro zone, we see virtually zero credible policy options from here on in. We think the only “hope” for the West is another policy mistake – in the form of QE3 in the US. But as mentioned above, the “hurdle” over which Mr Bernanke would have to jump to get agreement for QE3 is now much higher because of both domestic and international concerns. So, almost by definition (for us) more QE3 is likely, but only once the situation has become really bad in markets (1000/sub 1000 S&P 500; the UR starts rising again; the hard landing). In our view, the Fed has already put at significant risk its independence and its credibility, which in turn risks leaving both the US dollar and US Treasuries unanchored and as increasingly risky claims on an increasingly risky sovereign balance sheet. We judge that QE3 would significantly increase such concerns.
7 – We think QE3 will be both unavoidable and a grave policy mistake in the hard landing outcome. We think it (QE3) is unavoidable because under this outcome, where we expect a significant slowdown in global growth in H2, driven by an EM slowdown and an end to the global super-cycle in manufacturing, it is the only „stimulative? policy option left, and Bernanke and Obama both seem fixated with stimulus, at any cost it seems. Once this slowdown is apparent it should quickly become obvious that risk asset valuations are way too high, only supported by both overly optimistic growth expectations, and, as a result of QE, by a mispriced CoC; that the Fed has destroyed its credibility; and that there is no, or nowhere near enough “sustainable” growth in the US, in the UK, or in any of the DM. And we think it would be a policy mistake because it would represent all-out debasement and monetisation, which would seriously risk the safe-haven/risk-free/reserve status of the US, of the US dollar and of US Treasuries. And this would only be made worse if the euro zone does indeed solve its problems over the rest of this year, as we expect. We feel that QE3 would risk a very negative outcome whereby US Treasuries start being priced as a risky credit asset (with real yields rising sharply) and where the US dollar would no longer be viewed as any sort of useful store of value. We find it extremely worrying that over the mid-February to mid-March global equity sell-off, where the drivers of the sell-off were not particularly US-centric, the US dollar nonetheless sold off over this period. This is the exact opposite of what has been seen for more than the past two years, and not what the market expected. We worry that it may reflect growing concerns about the US sovereign and US policymakers who may now be turning into the central risk. If this is the case, and, as a result of QE3 the US dollar and US Treasuries become unanchored and are no longer seen as the world?s risk-free assets nor as the ultimate stores of value, then the entire foundations for valuations in financial markets could be at risk.
8 – In summary, the key driver of market returns right now and since early 2009 has been the Fed and its “intentional” mispricing of the true CoC through QE, but we think the Fed is fast approaching the limits of its credibility. We think the Fed is asking investors:
- to lever up at the wrong price;
- to take on risk at the wrong price; and
- to do this at precisely the wrong time in the business cycle.
For this to succeed, the Fed needs to convince investors it can keep the QE-fed Ponzi growing forever, permanently misprice the true CoC without any negative or unintended consequences. The US housing market seems quite clearly to be rejecting this proposition, but the equity market in particular has not. History shows no successful precedent, so under the hard landing path, when the CoC and pricing of risk normalise, as we would fully expect them to, asset prices, especially equities, should be hit very hard. We see this starting in Q3 2011, and likely lasting through 2012/2013 and maybe even into 2014, with QE3 becoming the central risk/problem, rather than the apparent solution. In this significant down move we should expect new lows in weak BS DM and EM equities (not strong BS countries) as in these weak BS nations policymakers, especially the Fed, would likely have little/no credibility and no/extremely limited policy options left (we see QE3 as the Fed?s last big stand). And all it will have achieved in our view, since QE1 and especially QE2 was flagged, is to have encouraged many more investors to wrongly load up on risk, at the wrong price and at the wrong time.
Assuming that the QE3 option is eventually exercised (as we do under the hard landing outcome) and assuming it does what we fear to the credibility and status of the US, the US dollar and US Treasuries, then we think the result, most likely at some point between 2012 and 2014, will be major fx regime changes and significant paradigm shifts in global fx markets. As these changes and shifts occur, gold could perform very well, as could other scarce physical assets (possibly super prime real estate). And the highest quality (by BS strength) nominal corporate assets – top quality equities in other words – may at least on a relative basis (if not absolute) perform fairly well.
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...and the VIX is under 18. LOL!
Bunch of criminal syndicate blah blah. Whenever I hear these guys talking about 2016-2030, you can be sure the next 24 months are going to be very grim.
Silver back over $41.25.
"Paging MethMan, paging Mr. MethMan..."
that fuckstick always appears during corrections.....ha ha ha .......
Baltic Dry Index has had its dead-cat bounce, now it is really dead.
http://noir.bloomberg.com/apps/cbuilder?ticker1=BDIY%3AIND
la da da da dah
it's the motherfuckin SLV
silver! silver!
la da da da dah
you know we mobbing' with the GLD
fuck blythe motherfucker!
RoboTrader hasn't said one word about Gold and Gentleman Jim in what.......months?
Yea, it was impressive to see silver break 41 again, but it looks very heavy right now.
Disclosure: Long SLV Puts
A superty duperty "surprise" rally in the US dollar...right here...would be a wipe out in almost all asset classes. Little Miss Euro, now a single crack addicted mother, is trying to facilitate the stud man's escape from L. Blanfeind's closet...and if that happens...oh, my.
Fake rallies built on devalued currencies...using super computers....not a good idea. Of course, the blah blah right now is about...an IPO. Great...way to be on message BlowHorn!
And about Apple, Dog...had you been watching it at the transactional level over the last two days...holy moly, what a paper mache job on that breakdown.
Silver is in bubble nothing to see here, Maria told me to sell my stash
www.silvergoldsilver.blogspot.com
Bunch of criminal syndicate blah blah. correct ! The United States of America is being taken over by an off-shore criminal banking syndicate . I tried to explain to my dinner companions what was happening to us & they laughed so hard that the entire restaurant of people were looking at us.
CMG just broke out. I refuse to cover before earnings.
As the crime wave net is cast wider and wider, I am quite certain that the GETCOs of the world, and their mark up schemes [of which this one is the clearest case] are going to be asked about the CMGs and the OPENs and the NFLXs of the world. And then, in a truly "surprising" way, we are going to learn about their criminal syndicate Wall Street banking "churn" schemes.
Funny thing...about the GETCO types...I'm not sure I see their exit plan? I mean I can see how the Goldmans of the world intend to pole vault out of trouble...but I don't see it on that lower minion level.
I know there are those of you who believe no justice shall ever prevail...and you might be right in an abosolute way. However, as is the case with markets, nothing is ever straight up or straight down...and on the lower rungs of the ladder, there should be some pretty interesting "interviews" before Congress in the next act of this sad play.
In the end, it is either the bankers or the Republic. You know...when you just boil it down to the very essence.
I agree, things only get interesting when the elite start eating each other. Then we get either real reform or a civil war. Again, the bankers or the republic.
just tell us if its going up or down!
It is..........maybe even at the same time. :>)
all too long winded for my goldfish attention span
Just 1 suggestion to these Wall St banker crooks and essays on the Global Economic Risk game theyre playing- Go ahead and turn off the HFT machines, stop printing $8 billion zeros daily to prop equities and bonds and raise rates just to the avg low rate over the last 30 years. Go ahead I dare ya.
The top 1% do not care - they all live on islands .. soon the cards fall and they party while the riots & starving kill 80% of the serfs
Good thing I have maps to their islands.
They never will - either party is full of shit. When our debt requires more interest rate compensation, thats it - last one out turn off the lights. Thats my take, the games gotta be played to the last hand apparently.
REAL ASSETS. REAL ASSETS.
Paper holders run for Real Asset exit door. I call it the
“RESOURCE THEATER”
What a mess we've got this morning! Domestic news is souring, Europe is sickening again, Asia is tightening, global growth is under pressure from rising oil, 3 wars that are not going so great, QE about to end and now fiscal tightening going forward.
It's all bullish!! Be a bull be a bull!!
stay away from banks! how we'll be trading bank names following the domestic news on goldman: http://www.hedgefundlive.com/blog/trading-the-banks-following-goldman-sachs-news
not wars.. just imperialist crowd control
Actually, we were called in as 'party chaperones' because of widespread drunken reveling! Positives only!
OT:
Shanky posts an epic rant this morning.
http://shankystechblog.com/blog/1117
the investment theme nobody seems to be talking about is uranium stocks down 50-70% since the japan crisis. good commentary on it: http://www.youtube.com/watch?v=f-EkkhJi9VY
That's because all the whales are buying uranium assets right now.
As the Fukushima crisis drags on for months and the Iodine, Cesium and Strontium levels continue to rise in our foodstuffs and water, the chances are pretty good Uranium stocks will get lower still.
If the S&P dropped 20% I still wouldn't be buying it.
A 1,350 Top In The S&P Or QE3, With A Change In The FX Regime And A Surge In Gold
yeah, tough choice there. I"ll go with Surge in Gold for 10,000 Alex.
"For [QE] to succeed, the Fed needs to convince investors it can keep the QE-fed Ponzi growing forever, permanently misprice the true CoC without any negative or unintended consequences."
Negative consequences: Are the top 1% truly worried about inflation?
Unintended consequences: Are the top 1% uninformed/unhedged?
If the answer to these questions is "no", then QE will continue. Unabated.
Top 1% wont vote Obama anyway so perhaps he is more concerned about the remaining 99%?
The top 1% (OK, 0.1%) own Obama, the Republican candidate TBD, and the congress. So vote anyway you like.
But don't throw your vote away.
Observing from the other side of the pond... I am not challenging the view/fact that top 1% is running USA but from where I am sitting it looks like the QE program is hurting the average Obama voter the most. I appreciate that many of them probably can't connect the dots but he still need them to vote to get re-elected. Just think it would be easier for a Republican candidate to take the QE infinity route?
Obama's job, I believe, is to make the best of the cards the top 1% deal him. He is a politician after all and that is his job. Obama's constituency will be given a choice between a repentent Obama or an austerity minded Republican. I like Obama's chances. Once elected in 2012 he'll do as he is told. Just like in 2008.
BRICs along with South Africa have completed an agreement to trade using their local currencies. They issued a denial that this is a challenge to dollar as global reserve currency.
Didn't they listen to Obama yesterday, or see Geithner nodding affirmatively? They just need to give us another decade or so, and we promise to get our spending under control. Really, we will. Just a few more years? Please?
"QE3 will be both unavoidable and a grave policy mistake"
Just bitchin, we're in good hands. Give me another Obama speech.
Libya's on fire again: bomb blasts in Tripoli. US news blackout in effect
Unless gold and the Euro crash, there is little possibility of stocks going down much further from here.
Crappy jobs report and PIIGS spreads blowing out everywhere means QE3 is virtually assured.
Not if we're going austerity. Too much political opposition
Ask ten people on the street to define austerity.
Don't matter what they think. Austerity means no more sugar for stocks.
A vast majority of the people do not know what QE3 is.
Whether or not QE3 happens has nothing to do with popular opinion on the matter, in my opinion.
I like mine with homemade blinis and crème fraîche, by the way.
LOL. good one.
Then follow up by asking if they think it's good or bad for them.
Then follow by asking if they would vote for a candidate advocating austerity.
With these answers, you can predict whether a hard landing or a soft landing is in the cards for the U.S. By the way, WW4 will be a hard landing. WW3 started in 1971 and continues to this day. It will end when the world is off the dollar reserve and fiat based FX markets no longer function.
We're not implementing austerity by cutting nominal spending. If you disagree, I offer the last 65 years as proof. I include current defense spending, the expansion of Medicare under Bush and Obamacare. Inflation will be the tool for implementing austerity.
QE for the next 10 years.
QE until the dollar collapses. At that point, Barney Frank and John Boehner will announce a bi-partisan bill to issue a new USD colored in blue versus green. Much more reliable as a currency, these blue-backs.
It will be backed by the full faith and credit of the United States of America.
what? no chart on jpm telling the board how through it all jpm is unfazed.
btw: gentleman jim sinclair, eric king and max keiser send warm regards as silver, if you're interested, creeps ever higher.
also, thanks for keeping your end of the bargain and changing your avatar as promised if silver passed $40.
Good! I hope they DO it RainbowTrader! Go for a $2 trillion QE and lets watch the markets go Fukushima! Fine with me!
Oh great bob, way to go out on the limb there.....LOL
If the sun comes up tomorrow, it could come out from the east
EEM showing relative strength. CMG, LULU, BIDU, SOHU still pinned at the highs.
The world could be ending and RoboTroll will still be buying the dips.
How's your gold & silver shorts doing, RoboTroll? I think Alf has been sending you to the poor house....LOL
Except Robo AKA Ol' Catfishmouth never actually buys anything...just surveys the markets for something up and prints the chart. Why Robo has chart posting abilities here I have NO IDEA.
me neither, that ability needs to be pulled, or i will soon be outtahere.
Dude. I think you're trying to talk to a Perl script.
how many lentils can you buy with relative strength?
There are no soft landings at the bottom of cliffs.
Fun fact. adding 'in bed' to every fortune in a fortune cookie works perfectly.
Just what is this 'credible and sustainable' solution Janjuah foresees coming from the EU? Ireland finds a pot of gold at the end of the rainbow? Greek tax cheats come forth en masse to 'get right' with the government? China buys the Iberian peninsula?
The euro is Rothschilds baby. They and their junior associates (worth around $300 trillion) are the world economic power owning the vast majority of multinationals in energy, ag commodities (5 families control the global grain trade) and gold miners. Russia and China are actively courting them not like Durden says, EU begging for Chinese investment.
Isn't it obvious that everything is bankster rigged? Nationalize all their wealth and industries is the way to go.
"Time to fade Jackson Hole" I love that. Too bad only about 1% of the population would have a clue as to what it means.
Try 0.01%
'Jackson hole'? I always thought they were reffering to Erin Burnett...am I wrong?
Classic... B cups is fuming over that one...
Are you Talking about this hole!!
http://xfinitytv.comcast.net/blogs/2010/tv-news/abc-news-bianna-golodryg...
Sallie Mae and Goaway
I'm gonna play the DXY bounce today. Anybody think it is lower than 74.6x?
My crystal balz tells me a sustained bounce is a real possibility if sentiment is shifting toward deflation.
Chart of price changes of things we need vs things we want.
http://goldandsilverlinings.com/?p=635
I think melt up into end of Q2 most likely,
We still have QE2 going on until Jun...
Then boom
The market anticipates more often than it reacts.
We have had our inflation scare.
Now for a change in trend and a deflation scare.
We probably have several of these cycles to go before we are "rebalanced."
And i completely agree with your assessment of the implications of qe3. So i really hope there is no qe3 necessary. There is no qe3 planned for now. I am confident of that.
In olden days every time a man's temperature rose or his face when crimson from blood pressure surge, the physician made the patient bleed. Blood letting was the universal solution in Galen's medical world of bodily humors as practiced for centuries since Hippocrates. Our current PHD practitioners have learnt well from Galen by letting the humors of our economy manifest itself through QE. That's where we are in the current mumbo-jumbo of Oligarchic face-saving, dressed up as astute geo-political financial balancing of asymmetrical structural fault lines . Of course the real medical world moved on to Avicenna, Ambroise Paré and William Harvey. But in the FED we only swear by...Galen and monetary blood letting to cure the patient!
In for the hard landing as of today. All equities in my ROTH, SEP, etc now in cash (can't borrow against, can't afford the penalty and tax hit right now). Can't complain, both up 75% since I rolled them over in early 2009. Will wait patiently on the sidelines as the momentum of the toilet bowl carrying all the turds down speeds up.
BJ isn't always right, but he is a rational man who neither panders to fear or ebullience.
Soft or Hard landing, the next several years look somewhere between difficult and impossible for most Americans, and maybe America.
Hard or soft, it's coming ... a hard rain's gonna fall.
http://www.youtube.com/watch?v=7zwBHd4kll0
We "Learnt," Our Leaders Are Bribed Not To
He means the corruption is systemic, this is a failure of a political class bribed and owned by the very finance oligarch criminals who committed the financial terrorism... aka Jamie & Lloyd, Amerika's Shoe Shine Boys...
Junjah has been so fantastically wrong so many dozen times that he's become completely irrelevant.
Yeah the above sounds like a rather false assumption on which to be basing conclusions...
And SLV is at a new high.
But, I have been using SLW and SSRI as leading indicators of silver. I haven't been seeing the buying in those. Nor GG...
This MAY be the high in SLV for awhile....
gh
Miners are exasperated.
This is another sign of a market top. Bob , the perma-bear who loved dollars from 2009 through 2010 , now sees the risk in the dollar and UST and is talking of inflationary safe havens such as prime real estate and gold and melt up scenario : he is late to the party. Better late than never perhaps but im starting to think fading anything and everything and going to cash for the short term. This is all too obvious and the Fed are going to pull the rug. When uber bears start talking nominal melt up , i think the inflation trade is over crowded.
So, short term, do the opposite of what Bill Gross says and get ready to buy lower-priced Treasuries when QE3 isn't announced?
Longer-term, do the opposite of what Bill Gross will say in 6 or 9 months ("Treasuries now a good buy") and get the hell out? Preferably into gold when its lower?
Even if I buy this strategy, there's a good chance of getting blind-sided (since Ben Bernake doesn't call me 5 days before he does something). I'm not picking up jelly beans in front of a hungry Rosie O'Donnell.
The futures strips seem to be showing a high likelihood of QE3 IMHO. A number of commodities in contango and the indices in backwardation, just as they should be.