Friday, November 05, 2010

What if...

The Fed actually got out of the way?

I don't get to the floor too much these days...don't talk to many of my old friends on the floor. I occasionally drop a note to Sharon at CNBC. Here's my take on the past few days.

So much to talk about. I think the past 2 days highlight the difference between the "markets" and "main street". The "markets" love QE...whether it's 2,3,4...or whatever. Turn the machines on and trade away. Remember what we've been talking about for years, everything in this market is a trade, and particularly a currency trade. What's my mantra...How strong is the dollar, really? What good is a 10% increase in equity prices if commodity prices increase 20% and the value of the dollar decreases 10%...the numbers just don't add up. The question, for me, is whether or not the people in this country begin to wake up and realize that these portfolio increases are merely an illusion of wealth...and I think they might be.
So yesterday we get QE2..even though it seems everyone knew it was coming, we STILL screamed higher. I have a hard time believing investors saw the announcement and called their portfolio managers and told them to buy. But boy, when the machines start going, look out!
Today, we get a GREAT jobs number(relatively, of course...we've still got a LONG way to go). This is good news, real good news....news that should really move the markets higher. But the "markets/machines" don't seem to like good news. Good news means maybe the presses will stop. Maybe the dollar won't continue it's forced march off the cliff...Uh Oh, the machines say, strong dollar, stop buying things...it's rather simplistic, I realize, but it's what happens. I'd like to think we all want the presses to stop printing...I certainly do. I want a strong dollar. I want good news. But I don't think the Fed will stop...unless they're forced to. Until that time comes...I'll keep buying metals and commodities...because if equities keep going up...gold and silver and agricultural products and oil will go higher, in my opinion. I actually would LOVE to lose money on my gold and silver positions...It means the dollar is stronger and the Fed is under control. But I don't see it.
I hear yet another political mouthpiece talking about how we don't have inflation as measured by the CPI. Let's exclude Gold and Silver...I don't think they act simply as a hedge against inflation anymore...I think there is an underlying concern in the soundness of currencies...and Gold and Silver have always been real currencies, and so there is even more reason to own them. But the CPI is a joke...because it doesn't ever measure the things we actually need in order to survive (I think health care should be another thing to consider in real inflation). Like I've said before...I don't care if I can get khakis at the Gap on sale...my milk and gas are not getting cheaper...when those things go lower, then I'll really worry about deflation.
Hope all is well...talk soon
Have a great weekend

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