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Tuesday, January 22, 2008

The meltdown........

As you watch the financial markets melt down...... Hope you are long gold and long puts. Puts for the short term and gold for the long.

The markets are simply telling us that we have borrowed long enough and allowed the fed to inject money into the system to save us too many times. I don't know if this is "the big one" any more than any one else does. However, if you are living on the San Andreas fault, you don't laugh when you feel a serious shake. Eventually, the whopper is coming, whether you know "when," or not.

What we do know is that the fools we have put in positions of power have no answers. Our esteemed head of the federal reserve admitted last week he had "run out of answers" for the presentcredit crisis, which has caused almost a 2,000 point selloff in the Dow over the last six months.

One thing you can be sure of, though, is that we will NOT be willing to undergo the pain of getting our economy back on a stable footing. The grit and resolve needed to do that belongs to past generations. If we were so minded, we would be willing to weather a downturn and a recession, as the fluff is gradually absorbed by a market which returns to sanity and begins pricing investment instruments with principles of sound money. If the present generation of clowns we call "leaders" tells you anything, it tells you that people willingly believe in easy lies rather than hard truths, whether it applies to sexual license, dissolution of marriage, hard work, parenting, our ability to influence and/or rule other countries to our advantage, or easy credit. Once we have chosen to believe these lies, we seek leaders who will reinforce them and tell us that our foolishness is not only true, but that living lives based on lies is a "right." All the hoopla in the markets today is just another example of the effects of people unwilling to accept unpleasant truths, only this time it is in respect to money.

The fed WILL attempt to rig the markets. If we see a serious enough inversion in equity prices, we already know what our government will do. Witness this quote by Bernacke:

"As I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation."

Rest assured, folks. This is helicopter Ben (Bernacke)'s assurance to you that he will continue to destroy the value of the dollar on international markets rather than allow the markets to contract. If you doubt this at all, consider that Bush has a "crisis team" to "deal with" serious market turbulence. That always means only one thing....., printing money to prop up prices, or refusing to let people sell when they want to (shutting down the markets), or a combination of both.

UPDATE: They have just cut the fed funds rate 75 points. This is panic, people, not a considered well thought out strategy. Bank of America just joined the group of banks announcing huge losses.

Dump equities. Buy gold, oil, mining stocks. You might want to buy bullion. The worst is a long way from over.

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