In this week's Off the Cuff with Mish & Chris podcast, Mish and Chris reunite to debate:
- The Facebook faceplant
- A great example of how artificial price supports end badly
- The Inevitable 'Grexit'
- The faster Greece hits rock bottom and can start recovering, the better
- Where next for home prices?
- Mish thinks we may be at a good entry point; Chris predicts more downside
Wherever one looks these days, there are signs of growing instability. Perennial investor darlings like Apple and Facebook (and their social media brethren) are stumbling. Europe continues to devolve as the players there dance to delay the inevitable. And most asset classes (housing, stock market, etc.) are likely to experience more downward price movement until and unless the next major round of money printing is announced. Both Chris and Mish agree that gold offers good protection against the growing instability, as well as against the purchasing power destruction that further quantitative easing will cause.
Chris sees the troubled Facebook IPO as a metaphor for the world we live in today, where most "market" prices are so falsified by corporate or government intervention that investors can't really tell what "fair value" is anymore.
In Facebook's case, the masses finally called the interventionists' bluff, and not surprisingly, there was a lot of empty air to fall through before the stock reached a level where investors were willing to put their risk capital into it.
What happens when the masses call the bluff on other interventions — for example, US Treasurys, where the Fed is buying over 60% of the debt brought to auction?
Greece
Greece must exit the euro. As discussed before, it's just simple math. Until it admits this, takes its lumps (which will hurt), and moves on, it's going to be locked in a situation that just prolongs its austerity-driven agony and ultimately will result in even greater pain and poverty.
Housing
Despite the nth headline from the National Association of Realtors claiming that the housing bottom is finally in, there is still much to be concerned about. Unemployment is still very high in most locations.
by former_user