The Fed? There isn't enough around Viagra to put any lead in their pencil. The Fed has been reduced to an impotent voyeur with his hands tied behind his back unable to satisfy even himself, let alone market participants, U.S. $ holders, housing, or banking.
G.M.'s stock is trading at 53 YEAR LOWS! As in, today's share price has not been seen since 1955! The oil shocks of the 1970's could not do to G.M what the current import crisis has done. Ford broke below the $5 mark today. At some point very soon, it is very likely that Ford's stock will lose its ability to be used as margin collateral. Citigroup hit a 17 year low, with Goldman Sachs putting the big C on their "conviction sell" list. No one with more than a couple of grey matter cells to rub together should be willing to wade into the Financials at this time.
Speaking of G.M. and Ford. I keep hearing how they "will have to be recapitalized". Don't you believe it. Any recapitalization will happen post bankruptcy (Dr. Lalani says that after their bankruptcy they will be renamed General Motorcycles & Mopeds), because nobody with money is going to be dumb enough to stand in front of the avalanche of liability these guys have to their morbidly obese, chain smoking, heart attack while deer hunting, fried pork rind eating, plumber's butt and beer gut retiree's healthcare bills. Offend anyone? Just calling 'em as I see 'em. The UAW got into a fight with the energy crisis and the energy crisis won. G.M. and Ford were ringside and got beat up just for watching.
(And Speaking about Financials... about 6 weeks ago Goldman had upgraded the financial sector, right about the time I began ranting that the mortgage write down mess was accelerating and would drop the Banking and Brokerage index like like a bad habit. I received a number of emails telling me what a dummy I was and that Goldman Sachs says the financials are about to turn around. 2 Days ago Goldman retracted that unwise prognostication calling it clearly wrong. But you know how I feel when I come to be on the "side of the majority - it is time to pause and reflect" - Mark Twain)
You ain't seen nothing yet. The next shoe could very well be the FINAL SHOE. If just ONE the foreign central banks decides that they are not going to attend one of the U.S.'s upcoming Treasury auctions, or if in the aggregate they decide to cut back on their purchases, the Fed will have to step in and Monetize that debt - and it is LIGHT'S OUT for the U.S. $. Just like that. Snap. No do overs, no Mulligans, no second chances, no point going to the video tape. Put a fork in it. Your $ holdings would be toast.
Now I FIRMLY believe that this is going to happen. The question is WHEN. Where is Don Rumsfeld when you need him? This is one of the great "unknowables" Rumy was so good at explaining... Anyway I would define the probability of when this way. 25% by the end of 2008. 50% by the end of 2009. 75% by the end of 2010, and 95% by the end of 2014.
There is precious little time left to do anything, if you are so inclined.
Good luck,
Mentatt (at) yahoo (dot) com
4 comments:
In 1989 when I started working, it was so easy. All the retirement and IRA money went into the S&P 500. With everything going on, last year, I switched it all into 10 year U.S. bonds, cause I didn't have many choices. So far, I seem to be looking brilliant, but is all my retirement money at risk now, being dollar-denominated? I'd really like to leave this Earth giving SOMETHING to the niece and nephew.
If you can, transfer your income to something that will hold its value despite what the USD does.
I'm not a financial expert, just an average joe who's done a lot of reading & observing. To me, oil & food commodities, while already high & quite volatile, should retain their real value. Many people are in favour of gold & silver, though I'm not 100% convinced.
Alternately you could transform the $ into "things" that will help you be more self-reliant. A good library of books covering a large range of topics, both fiction & non-fiction. Perhaps some good arable farmland with a reliable water supply, or somewhere that has good fishing. I'm sure you can think of more.
Greg, I think you're being optimistic if you think the chance of dollar collapse is only 25% before the end of the year. The crisis is accelerating, and confidence can go from positive to negative in a moment. We are almost at that point, teetering on the edge, and it may be treasury auctions or it may be Saudi investors quietly deciding to dump US$ investments (which they must have rather a lot of by now!) or pricing oil in euros, or one of another 101 possibilities you or I could think of.
I'd say shit-hit-the-fan time will be before the end of September.
If I wasn't such a happy person, I could get quite depressed!
A collapsing Dollar is equivalent to a dramatically higher gold price.
Greg and others on this board: What is the probability of gold being
1) over $2000 by 2016
2) over $3000 by 2016?
Thanks!
Robert S.
Post a Comment