Paying It Forward Regarding A Job Opportunity

This article is a response to a request... regarding a job I may be interested in.

Below is the request, or qualifier (besides what my cover letter and resume say):

1. Explain the relationship between the 10-year treasury and gold.

2. Explain the role of the federal reserve and give me your perspective on quantitative easing - it's benefits and detriments.

3. Is the strategy of stocks and bonds good, bad or neutral over the next 5-7 years and why?

I was asked to choose one.

I gave a brief summary of each one, expanding on one:

10 Year Note vs Gold

The relationship between the 10-year treasury note and gold is what people believe, perceive, and are told it is.

Many opinions, very few viable arguments.

The charts tell one story, and a very convincing story... but from the past... yet this is what people look to in suspecting the future.

Let us take a look at the monthly charts over the past 20+ years.

I added red lines.

[click for larger image]

[click for larger image]

Fear depicts action (choices, often bad), while following the strategy of SmartMoney overcomes fear and, instead, follows projections and simple rudiments.

When people fear, and markets tumble, money is rushed into gold.

Why?

An ancient belief, yet you can't eat nor clothe yourself nor house yourself in gold.

Well, you could... but the effort is impractical.

Once systems go back to a semblance of functionality, and fear subsides and trust between men resumes, money flows out of gold.

The ability to recognize and go along with cycles is a benefit.

For the person selling a product, they lean on pushing fear, much theory, citing popular economists, and charging a fee for their ‘expert opinions'.

What the SmartMoney Does

SmartMoney knows when to buy residential real estate, then commercial, cash out of equity (while keeping producing assets), then speculate in securities (growth stocks paying dividends with stop-loss orders), then repeat the cycle when these markets also cycle. 

The Velocity of Money

There are other ideas and concepts, but this is a simple review.

For more (besides the basics I've already shared), you'd have to hire me.

But to be kind, this is my suggestion for #1:

10Y: Buy when it touches the supporting trend line; sell if it falls sharply below it; sell when it nears the resistance line; buy again if it breaks resistant with conviction (more than two days and with heavy volume).

Gold: Pennant is coming to fruition.

Some things go without saying among the experienced, but for the novice reader I share a caveat written as a question:

Do you receive actual gold in-hand when trading a particular gold security?

If not, realize you are only trading a mechanism that measures the value of something.

If you do not receive anything of real value in return for placing your monies in a traded security,  like a contract that guarantees your receipt of something real (gold in this case), this is something to take note of.

Federal Reserve and Quantitative Easing

The role (primarily) of the privately owned Federal Reserve Central Bank is simple: sustain the empire.

As for its lesser roles of sustaining liquidity, one role is to measure the constant inflationary pressure from ever-increasing debt issuance.

Having items of actual value to balance the issuance of debt is quantitative easing (QE).

To be clear, that issuance of debt is of no intrinsic or nominal value, but people believe it is.

Besides the fact that it is, by law, the only method of payment for goods, services, public and private debts, helps people 'believe' - a compulsory belief.

A benefit to QE is to manipulate both markets and people's choices in where they place their bets.

A detriment of QE is that very few people follow the manipulative effort, especially when it doesn't benefit them or causes their decisions to be undermined.

Fear Influences Economy

When the lending stopped ten years ago (the 'Great Recession'), fear gripped people's decision-making.

Very few people were lent new debt.

While the many suffered, only those very liquid or with little to no debt survived and capitalized on the sell-off in real assets and the bargains on Wall Street.

This is why it is wise to be lightly leveraged in debt at all times with cash reserves on-hand.

Also wise not to be liable for the debt if / when the odds are stacked against youf.

Strategy re/ Stocks, Bonds, Cycles

I'll repeat what I mentioned under '10 Year vs Gold':

SmartMoney knows when to buy residential real estate, then commercial, cash out equity (while keeping producing assets), then speculate in securities, then repeat the cycle when these markets also cycle. 

Strategy in the stock market and bonds is at every moment an opportunity for those able to 'see'.

When markets crash, being short is obviously beneficial.

When fear subsides, the strongest companies will again be filled to high P/E capacity... and those with high ratios in a bear market are, according to market consensus, the more valued securities.

That is one of the very few true 'common knowledge' sentiments.