Notes From Underground: Erskine Bowles For U.S. Treasury Secretary = A Big Stock Market Rally

The election is over. It’s time for leadership and decisive action. Yes, there are winners and losers and promises to be kept. Six billion dollars was spent on elections in total and the money given to support candidates is not charity but an effort to purchase some modicum of influence. No problem with that for that has been the game since the birth of the republic and long before that in other political entities. If the “fiscal cliff” and its potential impact is as serious as some opine then leadership is needed to set the course of real action. President Obama, if you believe that the fiscal crisis is the most urgent problem, you will choose Erskine Bowles as your Secretary of Treasury because he has the ability to reach across party lines and get to rational levels of compromise. Mr. Bowles has the respect of party leaders and, most importantly, his plainspokenness is needed to get the American people to understand the rudiments of the looming financial debacle.

Take the lead and put in place a Secretary who has a running start in understanding the depth of the issue. Bowles is the devil incarnate to the lobbyists on K Street as he knows the secret of budget compromise. GORE ALL SPECIAL INTERESTS OXEN and the spending cuts and tax increases will be easily attained. Listening to Mr. Bowles slap the shit out of Grover Norquist is enough to get any “FISCAL CLIFFER” to fall in line. President Obama, lead and be not afraid of the powers on the democratic left who oppose spending cuts. Seize the day and appoint a truly qualified individual: Erskine Bowles for Secretary of the Treasury.

***The PLATINUM trade is again very interesting. Regular readers know that platinum has become a “catalyst” for many different trades during the last 18 months. Historically, platinum has traded at a premium to GOLD but in August 2011 gold has traded premium to platinum, which appeared to be an anomaly. This anomaly has been maintained for 15 months even though there has been major gyrations due to political problems in South Africa and uncertainty with Russian stockpiles. Platinum has a major utility in making catalytic converters, especially for use in diesel engines while palladium is used more in regular gasoline engines. Europe has a much greater preponderance of diesel engines and many hedge funds have used shorting platinum as a derivative play on the economic stagnation in Europe. In previous times, platinum commanded a premium to GOLD because it is also desired as a precious metal widely used for jewelry in the Asian markets.

The present premium of GOLD to PLATINUM informs us that the European problems are dwarfing all other concerns. The shorts were punished back in August when the labor strikes in South Africa turned violent and disrupted platinum mine production. The GOLD-PLATINUM spread narrowed from a negative $220 to $60 in a month’s time. Today we are back out to a negative $140 as the South African labor problems have quieted and European fiscal problems have returned to the forefront. The hedgies are back using the platinum as a short trade on negative European growth. A Bloomberg article from earlier in the week has caught my attention as it cites that the platinum market will have a shortage of 400,000 ounces this year compared to a surplus of 430,000 ounces in 2011.

This is something to watch going into year-end as a possible trade: Long platinum and maybe short some other of the industrials. As always, pay attention to the technical to evaluate any beginning movement in an investor change on Europe, which tends to correlate well with moves in the equity markets. A CAVEAT THOUGH IS THAT PLATINUM DOES STRUGGLE WITH A LIQUIDITY PROBLEM SO TRADE ACCORDING TO A RISK PROFILE OF LOW LIQUIDITY.

***Gary Kaminsky has a four-minute segment on CNBC, which is mandatory for all traders and investors. He reveals that many of the “salespeople” who appear on financial television may be double-dealing those looking to experts for some guidance. When people appear “touting” some big idea to the public, they may well be doing the exact opposite for their clients. When  I was beginning in the financial business I would regularly overhear salesmen telling their customers to buy while they would go into the pits and sell. It’s a very revealing piece with Gary Kaminsky and even seasoned veterans should partake of one of the most honest voices in financial media.


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9 Responses to “Notes From Underground: Erskine Bowles For U.S. Treasury Secretary = A Big Stock Market Rally”

  1. john brady Says:

    Yra. There is no way that Valerie Jarrett is going to allow a Clinton Democrat to run treasury when a far more-left economic agenda is within such close reach. I think it may still be about wealth redistribution. Consider Bill Daley’s experience

    • Joe Says:

      John, excellent observation. POTUS is strutting like a peacock like never before and gives off the vibe that he can say and do anything since he won reelection. Even with serious problems within state dept and intelligence community, PTUS is back to coloring his hair on a regular basis. I believe we’ll witness the most pompous, crass, and in your face administration of modern times, until it self-destructs with or without help from the GOP.

  2. yra harris Says:

    John–don’t know about the Bill Daley experience–but I am living on the hope of some sanity.My main point that if you truly think the fiscal crisis and the economy are the keys–well let’s get at it.The President will run into a wall as Boehner seems he will dig in his heels if he thinks the President is not genuine in trying to resolve the budget .I think that if the stalemate continues the Democrats will pay a far greater price in 2014 then the republicans–I know others disagree but it is always the party in power that pays the price of voter anger.See 2010 for a reality check

  3. chuck reeder Says:

    To the Obama bashers- first of all, get over it- you guys were in love with a candidate that changed his positions on major issues more times than the Cubs had a man on third with less than two outs and didn’t score last year- secondly, chill a little- don’t obsess with posturing- I still believe- and we will all find out soon enough- that O’bama will go to the middle. If he doesn’t,I will be both very disappointed and surprised. We will all know soon enogh.

  4. chuck reeder Says:

    that’s “enough”

  5. yra harris Says:

    Chuck–sums it up nicely.Many hope that Chuck is right ;and many hope that they are wrong.I am opening a new bottle of Japanese whisky–Yamazki and drinking to sanity.But let’s HOPE some sanity begins to take hold and there is a desire to solve the larger issues that await us.Again,I would advise watching the CNBC interview that Maria Bartoromo did with Bowles and Simpson yesterday afternoon.It should be mandatory for all high school students,just like the space flights of almost 50 years ago–and we also thought it was fantasy going into space.

  6. david Says:

    Yra- I saw the Kaminsky piece yesterday where Gary challenged others to put their true beliefs in print. I almost fell off my chair when he suddenly pulled out a newsletter from Bert Dohmen to use as an example of an analyst ‘honestly’ displaying his sentiment. Dohmen has been the most negative, bearish writer throughout the entire rally that began in March 2009. Heeding Dohmens’ advice not only would have cost you money, but would have you believe that the U.S. economy should fail tomorrow. Kaminsky’s cred certainly dropped a notch for anyone familiar with Dohmen.

  7. yra harris Says:

    David–I didn’t see that and am not a reader of Dohmen but that still does not undermine the point that Kaminsky was raising.I am often left laughing in the way taht TV pundits treat Marc Farber—he is a bear but called the stone low in the March 2009 in the SPS—again ,good thoughts and trading is always dynamic

  8. fooff Says:

    Thanks for another great post Yra. Love the site. Maybe many have seen the statement at the bottom of the CNBC page with the replay vids of the S&B commentary, “Erskine Bowles also told CNBC off-air that he would not be the next Treasury secretary.” source:

    Timmy G seemed fairly certain that his successor is already teed up , see a weekend interview with Al Hunt on Bloomberg for the body language. oh, The suspense is killing me!

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