Monday, November 16, 2009

Futures Heading Higher

All I can thing of right now is the saying "The Markets can stay irrational longer than many investors can stay solvent" We are shrugging off massive debt, massive trade deficits and look to run even higher. The dollar continues to fall and the consensus seems to be that the entire world will use the lower dollar to bet the U.S. stock market. I am afraid that we are missing the boat and are in for some downside pressure. I just wonder how long I can stay solvent in the face of this "everything is wonderful" scenario.

No one seems to be worried that the farther the dollar falls, the more expensive our debt will really become (as foreign investors will require higher rates). Of course according to the markets action lately, having the Federal Reserve monetize the debt has worked really well---but we all know that is not healthy. Right now it seems like our economy is smoking cigarettes, drinking heavily, not exercising, eating pure fat, and GETTING GREAT CHECKUPS FROM DR MARKET. GO FIGURE

I do understand that the appetite for mergers is good for the markets and we have seen signs of that appetite being revived. Have you asked yourself the questions "where would we be had Buffett not decided to buy Burlington"? It seemed to me that the markets were headed down technically until the Buffett/Burlington announcement.

How can long can the Federal Reserve maintain that inflation is at bay with oil, gold, copper, corn headed much higher? We are drowning in liquidity and are choosing to look at it like "Goldilocks". The Fed should come out IMMEDIATELY AND ANNOUNCE A HALF POINT EMERGENCY RATE INCREASE. We need to curb this liquidity and curb it now. Such an announcement would strengthen the dollar and put us mentally in a much better position to combat inflation. If you read my blog about a year ago, I was arguing that the toughest thing to do would be to reign in the monetary supply while the economy was still struggling. If we don't do it now, we are headed for some massive pain on the inflation front and we all know that it is very difficult to deal with once it begins to spiral out of control. Bernanke and the Fed must believe that they can put the brakes on liquidity through open market operations at a rate faster than ever before. I don't see how, but they must have that confidence.

It shall be interesting to see where we head from here, but the futures are telling me that I will continue to be wrong at least for today.
blog comments powered by Disqus