In his latest Basic Points analysis, BMO Global Portfolio Strategist Don Coxe claims U.S. Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke took the pressure off heavily-levered banks "by putting pressure on the heavily-levered speculators and hedge funds that were short the banks and the dollar, and long the commodities."
"With help from the SEC and the Commodity Futures Trading Commission, Paulson and Bernanke sprang the trap", which Coxe termed the 'July 13th Massacre.'...
Coxe asserted that Paulson knew: That the ultimate goal was to permit the banks to raise new equity, meaning their share prices had to rise a long way; and This would force a panic short-covering of dollar positions, setting off a mutually-reinforcing pattern of collapsing commodities, soaring financial stocks, and a rising dollar; and That a decisive break in gold, grains and oil futures, accompanied by the biggest dollar rally in years, would blow the inflation dragons away for a while; and Therefore, the Fed would no longer be under daily pressure to raise rates...When financials roll over, "gold and gold mining stocks should move swiftly back into favor. Inflation remains above central bank target levels in the U.S. and in many other countries across the world. Any return to pronounced weakness among the bank stocks will be strongly bullish for gold."
"With help from the SEC and the Commodity Futures Trading Commission, Paulson and Bernanke sprang the trap", which Coxe termed the 'July 13th Massacre.'...
Coxe asserted that Paulson knew: That the ultimate goal was to permit the banks to raise new equity, meaning their share prices had to rise a long way; and This would force a panic short-covering of dollar positions, setting off a mutually-reinforcing pattern of collapsing commodities, soaring financial stocks, and a rising dollar; and That a decisive break in gold, grains and oil futures, accompanied by the biggest dollar rally in years, would blow the inflation dragons away for a while; and Therefore, the Fed would no longer be under daily pressure to raise rates...When financials roll over, "gold and gold mining stocks should move swiftly back into favor. Inflation remains above central bank target levels in the U.S. and in many other countries across the world. Any return to pronounced weakness among the bank stocks will be strongly bullish for gold."
