Podcast

The most anticipated announcement of the year – perhaps too anticipated (sell the news?) – will answer the question, “How much new money will the Fed decide dump into the situation at their next meeting?”

With Fraudclosuregate picking up steam and threatening to shut down the US housing market for a while, or at least throw a double handful of sand into the gearbox, the Fed has gone on an all-out propaganda war to try to convince everyone that “inflation is too low” and that such a perilous state justifies another gigantic round of thin-air money printing.  Yes, they call it “quantitative easing” to try and inject a note of academic rigor into the conversation, but we can just call it what it is:  money printing.

Hardly an hour goes by without the airwaves being inundated with another Fed official making another statement about the “too low” inflation and what we need to do about it.

This past week was a wild one.  Gold and silver broke out to new highs, the dollar weakened, China’s grumblings about the dollar’s value took on new urgency, and the Dow held at over 11,000 (although another $4.69 billion thin-air money injection on Friday might have helped some).

How do we make sense of all this?

Unfortunately there are no compelling fundamental reasons to support what we are seeing unless you consider thin-air money printing, or the promise thereof, to be a fundamental driver.  While I understand how the various Wall Street gamers can consider front-running new Federal Reserve monetary excesses by piling into risk assets, trying to participate in such activities is raw speculation at best, and blind gambling at worst.

Wednesday, October 13, 2010

Executive Summary

• Perception will drive the market shift.
• Awareness of Peak Oil is still low but spreading rapidly.
• The military is mobilizing, but civilian government is AWOL.
• The Post-Peak transition will be more chaotic than it need be.
• We have time to prepare (but not much).
• Taking informed action now is critical.

Part I

I admit, there are certainly some very interesting things unfolding over in the mortgage world, but as much as I think they are important and worth following, they are not the greatest risk we face at this time.

The mortgage fraud mess has the potential to trigger for the next down-cycle, but it’s not going to supply the majority of the fuel for the next conflagration.

For that we need to keep our attention riveted upon the looming currency wars.

This weekend at the IMF’s annual meeting, the world’s economic leaders tried to iron out some differences on the subject of currency manipulation and debasement.  The bottom line is that everybody wants a cheaper currency; practically all major countries are actively pursuing cheap-currency policies.  And tensions are building.  Here’s how the US press described the outcome:

Stocks soared, bonds caught a huge bid, and commodities of every description took off – grains, energy, metals, gold, and silver.

What happened?  Was it suddenly determined that everything was worth more all at once?  No, what happened is this:  The markets are figuring out that what we have been predicting here for several years is, in fact, the direction in which the world is actually headed.  Printing is being selected over austerity.