Wednesday, November 11, 2009

The Unthinkable?

"Don't deny what your own eyes are seeing" was my admonishment to traders and brokers over the years...

So let's recap what we are seeing right now:

1. The Fed and Treasury appear to have walked away from the US$ in favor of housing and banking.

I would have thought they would have tried to walk the tight rope, but it appears that both their actions AND their speeches are telling folks to abandon the US$. "Don't deny what your own eyes are seeing".

2. The International Debt Market continues to buy Treasury bonds, notes, and bills - but for how much longer? The Japanese continue to buy, and have accelerated their purchases of, Treasury paper; clearly they believe that deflation is the bigger risk. They better be right, or the Treasury market is going to have one very, very unpleasant day sometime soon. (Disclosure: My biggest holding, bigger than precious metals are Treasury Notes.)

3. The Gold market does not believe in anything except Gold. That market continues to go vertical.

4. Natural Gas consumption denies the industrial pickup that the equity market foresees.

5. Oil prices in US$'s are high enough to tip the US over into another recession.

Given the above, I have no firm conviction on any course of action.


7 comments:

kathy said...

You just hit it. Greg. There is no clear course nor is it possible to predict what happens next. I thought it was interesting to read about the power blackout in Brazil and Paraguay. While we sit around watching the circus, one of these wild cards is likey to cause us some major headaches. I continue to invest in myself with tools, seeds, land and other tangibles. The market, for me at least, is feeling more like intertainment than information.

Anonymous said...

I was just reading a book about the days before the WW2 in Vienna. How Austro-Hungarian empire of 50 million just disappeared leaving them with only 6 million people. How former businessmen now spent their time sitting around in Cafe's, Gambling, philandering and living of their women's pawned jewelry. There is high unemployment and inflation. A thought struck me. That is probably what I can see Washington DC is going to look like in less then 10 years.

The parallels are starting to appear in the Western World. Formerly productive people (whether they do or don't actually have a job) are gambling on what remains of the stock market, hoping to get out before the crash happens. They are are desperate to score big while they know the casino and race track owners are tilting the tables and doping the horses. They know it but they don't care. They are just trying to figure out which horse is being doped so they can get in on the scam. When the biggest money is made by doing unproductive activities like what passes for "investing" now then the society is doomed and it is just a matter of time before collapse comes. And then of course the war which writes off all the debts and resets the game table again.

Unfortunately the only thing that holds its value in a situation like this is precious metals and that is if we are very lucky.

With this cheerful thought I leave you to your preparations. I am off to the seaside to have a coffee with some friends. There is a lovely cafe run by some American refugees from the Bay Area.

Yours truly,
Chuck H.

A Quaker in a Strange Land said...

Hi CHuck:

Hope all is well. BTW... where are you, Australia?

Kathy:

This is a difficult market environment in which to operate, to say the least... Still, life is good. I look forward to next year's garden

Anonymous said...

Agree with Kathy's comment...no clear course in some respects. The clear course appears to continue to be food, health, and enjoying the limited time we have on this earth with friends and family, without allowing economic and energy declines make us so we can't enjoy the present the only thing that offers much in the way of certainty.

Investing in Oil stocks seems like a good long-term bet, even at high prices, as long as you wait out the temporary declines as oil prices zig-zag up and up and up....

bureaucrat said...

The clear course is the same course they've been talking about for 20 years: diversification, unless you think you can buy certain things to the detriment of other things (my "American Eagle gold" idea in 2007 so far looks like genius thinking :)). One theme also seems to be emerging for the next 30 years: "real investments" Not financial hocus pocus. Commodities, reducing debt, some form of savings accounts or high-yielding stocks. The go-go days of high-flying zero-dividend small and medium-sized businesses stock investing is over.

Anonymous said...

Chuck,

This is not a new trend in the US as far as I can see. The "corporate raiders" and all the "restructuring," leveraged buy outs and other scamming since the 'eighties are just rearranging the puzzle pieces to extract cash without creating any new value. While real value was not created, lots of debt, leverage and risk were. This stuff gets rolling when conditions make scamming much easier than earning the old fashioned way.

Regards

Coal Guy

Anonymous said...

Dear Coal Guy:
If you get what you reward and you reward unproductive speculation then you get unproductive speculation. Obviously it makes no sense for the country as a whole.

Greg:
I am in Aotearoa. Another refugee from the Bay Area.