Happy! Happy! Joy! Joy!
Happy, Happy, Joy, Joy!
Happy, Happy.......uh, why did the music stop?
Early next year, this is what may happen once individual investors and consumers realize that they have been duped by B-squared, Ben Bernanke.
He and his colleagues at the Fed Reserve have been speaking out and making comments suggesting a further rate cut. This has led to mass buying of stocks across the board. Now, realize that most of the smart money had been buying under the radar before these guys decided to pipe up (usually at the insistence of the guys at places like Goldman Sachs, Lehman Brothers, etc. the guys who are the primary advisors to big, smart money).
Now that the "news" is unofficially out that the Fed has all but decided to cut interest rates, everyone else is in a feeding frenzy to buy, buy, buy. Where do you think the supply of shares is coming from? I won't answer that; I will let you come to your own conclusion.
What will happen come next year, consumers and individual investors will realize that the latest round of rate cuts will further erode the buying power of the dollar (inflation) and gas, gold, and everything else will renew it's march up in price.
How far down will the price of oil and gold "correct? Well, some of the analysts that I know are calling for oil to drop to $70 and gold to "retest" $650. I SAY THAT THEY ARE WRONG!
Why?
Well, we are having this rally in stocks due to rate cuts. Rate cuts are inflationary. Inflation also means that the Fed must pump up liquidity. This means that the printing presses must continue running. Gold, silver, and oil are inflation hedges.
The #1 job, as the Fed sees it, is to prevent the economy from going into a recession. We may or may not already be in one. Recessions are tough to say that you are in it. They are usually declared once they are half over. But of course, depending on what you do, and what your outlook on life is, you may be in a perpetual recession (I know that is nobody that is reading this, otherwise you wouldn't be reading this). There can be no inflationary slowdown while all of this is going on. The Fed only cares about keeping back inflation. Wall Street is appeased because it gets short term profits from all of the activity.
But here is the rub, if you inflate too much, too fast, a recession will become a self-fulfilling prophecy. Consumers will say enough and stop buying in the amounts that they are buying.
Remember, salaries are not keeping up with the REAL inflation rate (not what the government tells us) AND credit is tightening for consumers. This will cause a slow down in consumption of non-necessity items. This could take us to recession.
Credit for investment purposes (real estate and cash flowing businesses) is still readily available because banks are in the business of loaning out money, after all.
And for stock market investors, I would not be making bets on the general market, but this volatility will lend itself to many, many special situations.
Stay tuned because I will have a very special offer for all of you in time for you to start your portfolios off right in the New Year.
Notes From the Underground:
Dow: 13,390.25 +78.52
Oil: 89.50 -1.51
Gold: 783.60 -12.30
Silver: 13.93 -0.35
To Your Investing Success,
Patrick
Happy, Happy.......uh, why did the music stop?
Early next year, this is what may happen once individual investors and consumers realize that they have been duped by B-squared, Ben Bernanke.
He and his colleagues at the Fed Reserve have been speaking out and making comments suggesting a further rate cut. This has led to mass buying of stocks across the board. Now, realize that most of the smart money had been buying under the radar before these guys decided to pipe up (usually at the insistence of the guys at places like Goldman Sachs, Lehman Brothers, etc. the guys who are the primary advisors to big, smart money).
Now that the "news" is unofficially out that the Fed has all but decided to cut interest rates, everyone else is in a feeding frenzy to buy, buy, buy. Where do you think the supply of shares is coming from? I won't answer that; I will let you come to your own conclusion.
What will happen come next year, consumers and individual investors will realize that the latest round of rate cuts will further erode the buying power of the dollar (inflation) and gas, gold, and everything else will renew it's march up in price.
How far down will the price of oil and gold "correct? Well, some of the analysts that I know are calling for oil to drop to $70 and gold to "retest" $650. I SAY THAT THEY ARE WRONG!
Why?
Well, we are having this rally in stocks due to rate cuts. Rate cuts are inflationary. Inflation also means that the Fed must pump up liquidity. This means that the printing presses must continue running. Gold, silver, and oil are inflation hedges.
The #1 job, as the Fed sees it, is to prevent the economy from going into a recession. We may or may not already be in one. Recessions are tough to say that you are in it. They are usually declared once they are half over. But of course, depending on what you do, and what your outlook on life is, you may be in a perpetual recession (I know that is nobody that is reading this, otherwise you wouldn't be reading this). There can be no inflationary slowdown while all of this is going on. The Fed only cares about keeping back inflation. Wall Street is appeased because it gets short term profits from all of the activity.
But here is the rub, if you inflate too much, too fast, a recession will become a self-fulfilling prophecy. Consumers will say enough and stop buying in the amounts that they are buying.
Remember, salaries are not keeping up with the REAL inflation rate (not what the government tells us) AND credit is tightening for consumers. This will cause a slow down in consumption of non-necessity items. This could take us to recession.
Credit for investment purposes (real estate and cash flowing businesses) is still readily available because banks are in the business of loaning out money, after all.
And for stock market investors, I would not be making bets on the general market, but this volatility will lend itself to many, many special situations.
Stay tuned because I will have a very special offer for all of you in time for you to start your portfolios off right in the New Year.
Notes From the Underground:
Dow: 13,390.25 +78.52
Oil: 89.50 -1.51
Gold: 783.60 -12.30
Silver: 13.93 -0.35
To Your Investing Success,
Patrick
Labels: Ben Bernake, Fed, Stocks
posted by Dusan at
6:55 AM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home