January 27, 2013 at 12:36 am #17636
Ck out the recent Individual Investor Sentiment Reading:
See also this article from the NY Times:
Small investors have jumped into stocks again . . . usually the sign of a top.
Note: None of the NY Times quoted idiots (be they of the prof’l or amateur variety) mention what could really crater the stock mkt: namely, higher lending leading to higher money velocity, leading to higher inflation (Remember: MV=PQ), leading to higher interest rates (After all: The Nominal int rate = The Real int rate + Expected inflation).*
Then, higher interest rates lead to higher federal debt service costs, which, in turn, lead to even higher deficits, and ultimately, to a universal & multiple US debt downgrade . . . and eventual default: via hyperinflation or otherwise.
*Not to forget: Money moved from bonds to stks can also cause higher rates. Observe how each day when the S & P 500 rises, the 10 Yr rate rises with it. Soon, the this rate will breach 2%. Also observe: Higher rates cause lower corporate profits, as corporate int exp rises too.
As Bill recently wrote about US sovereign debt: “This is such a huge sum that it cannot be paid.” I would add the obvious: It can’t be repaid, hence, it won’t be. It’ll either take a haircut, or it’ll be inflated away.
Judging by how the Fed has abandoned all fear of inflation, inflation is exactly what we’ll get. Typically, men avoid that of which they are afraid, but once the fear is gone, they forge ahead. (Fiction writer that I am, I can imagine a Fed Open Mkt Committee toast, just before the members down the 3rd round of drinks: “Well boys, our mass printing hasn’t caused inflation yet;** so, to hell with reticence, let’s drink to two trillion more!”)
**Perhaps Ben would wink at this juncture of the toast b/c real inflation is already 10%.
Almost two years ago, the theme at Courtomer was “Time is on Our Side”. I know that the Bonner Family Office Brain Trust is pondering a lower cash position, however, except for converting some of my cash into real money, I’m sticking with the Mick and the Stones Strategy. 😉
After all, time is NOT on the side of the US govt.
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