Keeping an Eye on Inflation Expectations?

Leo Kolivakis's picture

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Carina's picture

Here's the link to the complete document (Breakfast w/Dave 11/10/2009):

Leo Kolivakis's picture

Thanks Carina, very interesting, but be careful with COT reports. A lot more speculation happens in the OTC markets.

Carina's picture

From 11/10/2009 Breakfast with Dave (David Rosenberg):


Looking at the latest Commitment of Traders (COT) report, we can see some pretty interesting (and potentially disturbing) trends taking place (data for November 3rd):

  • The only areas where the speculators (non-commercial accounts) are net short are in Treasuries and in the U.S. dollar. Everything else has massive net speculative longs and hence near-term vulnerable to a reversal.
  • There is still a NET speculative short position in both the 10-year Treasury note of 85,551 contacts (on the Chicago Board of Trade). There are 95,648 net short contracts on the long bond too.
  • But there are 29,608 net LONG positions on the 30-day Fed funds contract —down from the highs, but it means that Fed tightening is completely off the radar screen. At the same time, there are 152,311 net longs on the 2-year Treasury note, so it would seem as though we have a crowded trade among the speculators on a bear curve steepening trade.
  • There is a significant net long position on the S&P 500 to the tune of 208,448 contracts on the Chicago Mercantile Exchange (CME).
  • There is also a huge net speculative short position on the U.S. dollar (the ‘carry trade’). For example, on the CME, we have 24,389 net speculative long CAD positions; 50,264 net speculative long contracts on the Australian dollar, and 28,036 net longs on the Euro. These are huge numbers. What happens if/when the U.S. dollar ever undergoes a countertrend rally?
  • The largest speculative long positions are in the commodity space (this is near-term bearish) … 271,564 gold contracts (a record) on the Commodity Exchange (COMEX); 44,312 net longs on silver (near-record but not quite), West Texas Intermediate oil contracts on the New York Mercantile Exchange (also a record); 10,871 net long copper contracts (a new cycle high); 5,538 net speculative long contracts on the Goldman Sachs Commodity Index.


Duffminster's picture

I'll keep saying it because it still isn't understood even by the people 100 times smarter than me.  If the big hedge, pension and other funds that have gone long in gold or gold ETFs want to see there investment beat the long term suppressionary forces of the Bullion Banks, and commercials and the non-economic trades backed by certain local Central banks, they need to gain the high ground.

The high ground in the Precious Metals Battle is Physical Silver and Gold. 

The cartel knows this and it seems like they are using the leveraging relation of silver to gold to sell silver into the market to keep gold from blowing through $1650 and in fact trying to take it back to down to $1040. 

$100 Million spent to take physical silver off the COMEX and converting GLD and SLV to 1000 OZ.  bars of silver and gold is one of the fastest ways to take away the small amount of physical ammo that the huge gold and silver custodians use to make their short plays have any leverage.

The battle will be won on the physical level, not the paper level and the sooner the fund managers get this and start working with that knowledge on the broadest possible basis, the sooner gold and silver hit their inflation adjusted highs in my opinion.   They have the money but do they have the guts and the knowledge? 

This is all just my opinion and not investment advice.  

Problem Is's picture

Is this similar to the manipulations and problems US bimetal policy in the 1880s caused?

Anonymous's picture

Duh, Leo....we are Japan circa 1989 only our debt to GDP
has already surpassed theirs at that point. Check the
IMF figures. The 10 year bond will be snapped up for the next five years while Japanese style spikey rallies will
exhibit lower highs and lower lows on the way to the
ultimate bottom. Bernanke can't print enough or debase
the dollar enough to stop this from happening. Do the
math. This reflation/inflation trade is just a phase
we're passing through just as Japan did.

Leo Kolivakis's picture

There is a possibility that we enter a long protracted downturn and experience our lost decade, just as Japan did. If so, pensions will be snapping up long-term bonds as they adopt liability-driven investing. It's already happening. But if there is a stronger than expected global recovery, watch out, inflation expectations will shift.

Anonymous's picture

Understood. We are on the same page except
for the strength of the global recovery.
I think it will be quite weak and equities
and commodities will ultimately be
crowded out by sovereign debt. In effect,
UK, Eurozone and USA are ALL Japan now
with similar debt to GDP profiles of
early 90's Japan and rising to 118% by
(referencing IMF figures and projections)
That being said, I estimate the lost
decade will be cut to 5-8 years. Course,
that's an eternity.

Anonymous's picture

Mad Max has it


Anonymous's picture

Since 1978 I have built up and saved 1478 pounds of gold. It's in the basement of my house. Is this safe?

AN0NYM0US's picture
Yes, it's safe. It's very safe. So safe you wouldn't believe it.
No, it's not safe. It's very dangerous. Be careful.
Anonymous's picture

Uh...I dunno, what was your address again?

MinnesotaNice's picture

"Now the Indians have decided that they have more dollars than they want."

I think pretty much everybody has more dollars than they want... I know that I do.

Mad Max's picture

How much credibility should we put in the stated auction results - how do we know those weren't purchases by covert operations of the Fed, or by banks that had "gentleman's agreements" that the Fed would (somehow, post-QE) purchase the notes a short time later at a price that would make a profit to the bank?

Anonymous's picture


Problem Is's picture

Question from a novice:

Don't you get an indication of real demand by how much the primary dealers themselves are stuck buying out of each auction?

And how much the Fed buys back from them 3 to 10 days later by whatever lettered program is all the rage at Bernak-ster Printing, Ink... I mean Inc.?

Anonymous's picture

Stop making sense.

Anonymous's picture

Hurrah, finally someone sees the real (lack of) inflation picture.

Anonymous's picture

"But the Fed noted in its statement that it’s still going to be paying close attention to inflation expectations in the marketplace..."

But the problem is that by the time you recognize the effects of inflation, it's already too late.

So 'yes', morons. Keep the spigots open. But leave the window open as well, so you can plunge to your death once you 'see' inflation on the horizon.