Archive - Jan 19, 2010

Clearly there is a permanent bid in gold, because of the Fed's (and other central banks') aggressive monetary policies, both proactive and reactionary. But the complacency in markets, discounting a recovery, and increasing sovereign credit risk, make another round of QE anything but a foregone conclusion, as far as what is priced into the market. Until excess reserves are unsequestered (by ceasing interest payments on them for bailout recipients to collect a riskfree spread), there is no signal that the Fed is done with its printing. And from now until the next round of liquidity injection, there has to be an endogenous event to provoke reactionary response. Here's why.

The EUR/USD foretold the weak dollar-driven asset rally that characterized the post-dotcom crash 2000s, the inflationary energy bubble/crisis in late 2007 to summer 2008, the liquidity crisis in fall 2008 to spring 2009, and the liquidity rally since spring 2009. Could the strong reversal since December be forecasting a return to mean reversion and a rush to (dollar) liquidity?

As you recall, my take on the deflation vs inflation debate is much less crystal ball-ish than many other pundits on the web. I never was very much into fortune telling or forecasting the future. From what I observed and researched, if I had to make a call that call would be stagflation.

On that note, here is an interesting note from one of my site's subscribers on how China is exporting to what is amounting to stagflation to the United States, now!

JP Morgan's Q4 results show that banks are not only still in hot water yet, but the pot hasn't even really started to boil. Why is it that I look at the info and get such a different impression than much of the media and the sell side who proclaim "blow out results"? Yeah, the results "blow" alright...

Let’s Try Chinese Style Securities Regulation. Just execute the bastards! Great for the human organ business, but not so good for crime prevention, or getting your money back. The urban legend about a vast secret complex of government concentration camps is true. The next kidney up for sale may be yours.

According to the C.D. Howe Institute and the British-North American Committee, the governments of the UK, US and Canada are understating the true cost of public sector pension plans. If true, then you got the seeds to the next debt time bomb. The hard road ahead is looking harder when you sit back and analyze the implications of all these pension liabilities, especially if you consider the possibility that they're grossly understated.