BEHIND THE MONEY: A Winning Trade Against Tentative Treasury Secretaries, Drunk Finance Ministers
Gold is surging again today, continuing a rally that really picked up steam a week ago, when Treasury Secretary Geithner released a tentative bank rescue plan that was short on details. It seems that when Washington has a job to do, it pays to bet against them doing it effectively by going long the universal shelter from the economic abyss...gold. Dennis Gartman, in his widely-followed morning letter, notes that he is long gold and looking to add to his position on "any intra-day $5-$7 break in the spot price."
With more details on the bank rescue plan still "weeks" away and a new mortgage program to be announced tomorrow, it may pay again to bet against Washington by going long gold and short the market, some traders say. Our latest Fast Money viewer poll shows that after bungling the bank rescue and the stimulus, there is little chance that Obama will get this foreclosure plan correct.
And if you needed any more convincing about the scale of the bumbling by our global governments in handling this credit crisis, take the Japanese Finance Minister, who was caught over the weekend at a G-7 press conference slurring, apparently under the influence of alcohol. He has resigned following the incident.
Maybe an act so irresponsible will mark the top in finance minister follies and thus, in gold so be careful if you are deciding to jump in right now. It has had a nice move. Guy Adami, a FM trader and former gold trader for Goldman Sachs, notes that if you are already long gold, use a 'trailing stop' to lock in profits and protect yourself from significant downside.
Speaking of alternative investments, we will be highlighting trades away from equities all this week, in a series well-named by our line producer Jason Farkas as "Outside the Stocks". If Harvard is right about abandoning equities for the long term, every portfolio will need some diversification. Maybe our traders can give you a few ideas.
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