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Monday, October 15, 2007

How do you make sense of the markets, post housing crash?

ANOTHER Financial Sector binge covered up by the chief enabler -- the Fed.

Investors bidding up commodities, equities and currencies is the same thing -- dumping the dollar.

Look for a serious run on the dollar soon. By election time '08.


Think of the recent Fed bail-out as giving away money to the Financial Sector. Jim Cramer and the other hysterical old ladies of the high rolling investor class dropped their macho risk tolerance facade and started crying just long enough to get Papa Ben Bernanke to give them more money. Now they are busy converting that money into real wealth -- stocks and commodities, oil, gold, wheat -- and into secured financial wealth -- bonds.

The Fed's bailout follows the pattern of 1987 and 1998. Unregulated markets made fools of geniuses, upon which the Fed lent them the financial stability of the country so they could be geniuses again.

Now the market knows. Don't worry about risk. Papa Fed will bail you out. It's no accident that instead of vigorous industry, plant and equipment, we have instead the equivalent of a mammoth video game parlor called Wall Street. Fine for entertainment, but these games have real guns, and those are real people losing homes, families and hope. One of the things those real people don't understand is they are paying the freight

Certain inflation will follow the dollars fall and this bidding up of commodities. Pensions and endowments will lose their real value to that inflation. The financial system is gimmicked and rigged to such an extent the Fed has lost control.

It's not inflation OR recession. It's inflation AND recession.

If the Fed tries to stem the inflation or support the dollar with higher interest rates, it becomes a deep recession.

Why a run? This country's trade deficit over the past thirty years has put trillions of dollars in foreign hands. The money is in the form of securities, because those securities were a good deal with rising values. No longer the case. With the value of the securities fading and the value of the dollar falling, the foreign holders are seeing their investments eroded from two sides. Better get out sooner than later, hence a run.


5 Lessons from the financial meltdown in housing
7 Remedies for the Financial Sector

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