speculators, long termers, and hedgers are quietly loading up. Gold still 10% below peak of 1220, Silver off 15% of it's 24 month of $20, and Platinum quietly trading to new 24 month highs. Over the past several months, precious metals have traded inverse to market movement, but less so past 90 days, with less downs and more ups.
Market giving a clear signal. Base has been built to move higher. While you may not like buying metals, nice hedge against major inflation streak.
<Crash versus orderly unwind versus hyper.>
An excellent read on the China bubble, a crisis checklist, and many other great points.
Here is one from the article I brought up the other day about wasteful spending.
- The efficiency of investment (incremental GDP growth for each additional unit of investment)
is trending downwards towards wasteful levels;
Edward Chancellor, a member of the asset allocation team for Boston-based GMO and, interestingly,
the author of a recent Financial Times piece on Australian property, is a financial historian and bubble expert.
Crash versus orderly unwind versus hyper.
I would hope and pray for orderly. But that would take a lot of brainpower in DC, including the will to rein in the deficit spending BY CUTTING BACK on the goodies. Not by raising taxes and spending more.
Anecdotal-my oldest is a contract ARMY ROTC. He graduates in May as a 2nd Lieu. Was encouraged to go into National Guard (accepted in the TX Guard) due to military spending constraints domestically. While he will spend time in officer school this summer/fall and undoubtably be deployed next year to the middle east, the Army would prefer to have a lot of their youngsters not being paid except while active. Sitting around a base and getting paid for down time is not on their agenda. So my boy will get a job and work for a living while not on active duty. A citizen soldier for the next 4+2 years.
Wish the DC folks had the same attitude. Wouldn't it be novel if they worked in the real world, then did their time in office for 2-4 terms, then went home to work again in the real world under the laws that they passed? Without all the retirement perks that insulate them from the real world...
<While a number of things are going down in value, printing presses of world economies are crankin'. Which is the justification from
central banks for fighting deflation. "Don't worry, we are helping do our part" is the central bankers retort.>
Denninger quote today totally sums up my perspective.
"Let me know when the fraud goes away and balance sheets can be trusted once again, and I'm interested in investing in this market.
But not until, because if you do so you are risking a 100% loss when the scam is exposed by the insufficiency of cash flow, you will
get no warning before it happens, and none of the executives or regulators who misled you about the solvency of what you invested
in will be indicted or prosecuted."
<Bottom line is that while housing prices are dropping, commodities that have essentially inelastic supply are going up relative
to the value of currencies, whose supply is growing rapidly.>
As we all know speculation and carry trades have fueled commodities, but what happens when the bill becomes due?
Remember oil at 35?
Do we get a crash, and orderly unwind, or more printing resulting in hyperinflation?
Earl, good article, reaffirms what we know.
While a number of things are going down in value, printing presses of world economies are crankin'. Which is the justification from central banks for fighting deflation. "Don't worry, we are helping do our part" is the central bankers retort.
Bottom line is that while housing prices are dropping, commodities that have essentially inelastic supply are going up relative to the value of currencies, whose supply is growing rapidly.
Everytime the economy drops (like 2008), commodity prices take a hit. But they don't hit a lower low. If we have 10 dollars today, and the government prints another 10 dollars tomorrow, inelastic supply items would double in price. Might be some lag time, but that's just the way it is. Only ramping up mining and oild production would change the balance. Which takes time. All the while, they are printing more paper.
<Try commodities. In a deflationary environment, they go down. Down. Down.>
<Copper and oil are streaking as well. I wouldn't call this an industrial based surge. I would call it a broad based signal of concern about robust money creation.>
Agreed, not a result of end user demand but up from speculative carry trades.
The worse kind of inflation. I'll call it manipulation.
On the other hand lots of "stuff" is on sale, including RE.
Either way gold looks more and more like it's becoming the default currency.
"what assets are rising?"
Try commodities. In a deflationary environment, they go down. Down. Down. In late 2008, Gold hit 870 or so. Silver around $12. PT 890. All in a liquidity crunch combined with the specter of global deflation.
Copper and oil are streaking as well. I wouldn't call this an industrial based surge. I would call it a broad based signal of concern about robust money creation.
<I smell a whif of inflation concern.>
What assets are rising?
Maybe it's because the Euro/Pound are getting crushed and the possibility of a Greek bank run.
Add in the shortage of gold in the Canadian vault issue and we could factor in +100.00.