Metals market attention shifts to China

In The Lead: “How Sweet Is IT?”

Richmond Fed President Jeffrey Lacker (the sole dissenter from last week’s monetary “sweetener package”) said he believes that the allocation of credit (putting money into the hands of the lenders, etc.) is in the domain of Congress and the Treasury, but not the Fed. He noted that he “strongly opposed” the new bond-buying program as “channeling the flow of credit to particular economic sectors is an inappropriate role for the Federal Reserve.”

According to Bloomberg News, “The Richmond Fed chief said he also opposed this language and that “an implied commitment to provide stimulus beyond the point at which the recovery strengthens and growth increases would be inconsistent with a balanced approach to the FOMC’s price stability and maximum employment mandates.”

Last week’s “sugar rush rally” — okay, we’ve beaten that term to death now — came on the fourth anniversary of the Lehman Bros. collapse that almost “broke the buck.” Markewatch’s Mark Hulbert found some irony in the development, noting that “In essence, we’re told, the market rallied because the Federal Reserve concluded that the economy is in such horrible shape that it must be put on even more remedial life support. Got that?”

Mr. Hulbert also reminds us that when thing appear to be most bullish, that’s precisely the time to put up the “radar” and turn cautious. He cites, for example, among others, a statement that reads something like this: “I am ready to be a bull again! Not now of course, the exact time is still difficult to tell, and we will in all likelihood be early to the game, but three crucial elements necessary for a new bull market are getting our attention. The housing market is beginning to show serious signs of a bottom. … Quietly, the financial sector has been slowly healing.”

The observation was made just a few weeks prior to the Lehman collapse by one noted market advisor. Now you may freely substitute stocks with commodities and the housing market with the dollar and cut to today’s blue-skies/ green-light gushers of bullishness that are being made in the wake of QE2. Is your radar on?


Until later this week.

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About the Author
Jon Nadler Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America
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