Archive - Aug 10, 2010 - Blog entry

The water in the GoM is over 90 degrees. Usually that spells trouble.

While everybody is dissecting the Fed's latest move ad nauseam, I keep things simple. The Fed will do whatever it takes to reflate risk assets to shore up banks' and pensions' balance sheets, and bring about mild inflation to the economic system. Are there risks to QE 2.0? Sure there are, but the bigger risk is if they do nothing at all.

A government official named "Lubchenco" strong-arming scientists to tow the party line, and a government agency "losing" samples instead of sharing results with the scientists who had taken them.

Sounds like the Soviet Union, doesn't it? Too bad it's America.

The first thing that needs to be said is that IF we have another systemic meltdown like that of Autumn 2008, Gold will likely go down along with everything else. There are simply too many big players (hedge funds, investment banks, etc) with heavy exposure to Gold who would be forced to liquidate their positions during a systemic collapse. I know this is not what the Gold bugs want to hear, but during systemic Crises, just about every investment on the planet plunges while the US Dollar and Treasuries rally.

The Fed Open Market Committee, in a major policy shift, voted today to roll its holdings of maturing Fannie and Freddie debt into longer term Treasurys. This represents a significant change in Fed policy and it appears that the anti-deflationist wing of the Fed, led by James Bullard, president of the St. Louis Fed, won over the anti-inflationists.

You say PermaBear, I say Realist...

In his weekly letter, John Mauldin provides us with more signs of stress in Chinese property markets. 

• Strength in the USD across the board today, most notable against the GBP which is off over 1% after the RICS report data.
• The UK housing market is showing signs of weakness, with the first drop in prices in a year according to the RICS report. Fears of a housing led double dip recession have been heightened.
• Over 14 million people are likely to be effected by the floods in Pakistan which many experts say will have a more devastating human cost than the Haiti earthquake and the 2004 Asian Tsunami

Would I lie to you, comrade?