Greenspan now sees INFLATION on the horizon, so rates must rise.
OK, but consider:
The looming Inflation is:
BAD FOR GOLD! Right?
BAD FOR REAL ESTATE AND RENTS! Right?
But, GOOD FOR THE DOLLAR!
And, higer rates? Well, always a big thumbs up for Stocks, right?
And, it's pretty clear that Greenspan's warning to the CARRY TRADERS
is being heeded.
BECAUSE ANYTHING INVOLVING INCOME IS BEING SOLD EN MASSE!
Eight Percent Munis soon? Fifteen percent junk? I'm buyin!
And, as for gold:
The bombings in Iraq and Saudi Arabia, and the generalized chaos in
the middle east, along with the carved in stone June 30 turnover date
for Baghdad?
WELL, THAT'S ONE BIG SELL SIGN FOR GOLD! Right?
IN SHORT, EVERYTHING IS UPSIDE DOWN NOW!
AND, IN MY VIEW, WE ARE VERY MUCH IN DANGER OF A NASTY STAGFLATION
SETTING IN LATER THIS YEAR!
HERE'S WHY:
Much of the recent "boom" was a liquidity driven reflation play on
stocks! And, of course, real estate too. And yes, that snot-nosed brat asset, Commodities, as well.
God knows, the boom surely wasn't based on "pent up demand!"
Or otherwise "demand based," because of a long period of decline, or tight money. In short it's not demand that "kicked in" it was a revival of the bubble mentality so beloved on Wall Street.
Indeed, the actual "boom" was based more on cost cutting and off-shoreing than anything else. And, of course, VERY CHEAP MONEY!
THE SINE QUO NON FOR GREENSPAN WAS THE REFLATION OF THE STOCK MARKET BUBBLE AT ALL COSTS!
But, only in the last few weeks has the liquidity bubble started to
seep into commodities---AT THE MAIN STREET LEVEL!
Now Greenspan panics!! Not during the asset bubble reflation!
But, if you have a SOLELY liquidity based boom?
Can the economy survive higher rates? PROBABLY NOT! DEFINITELY NOT!
AND THAT, GENTLE READER, IS WHEN THE STAGNATION PART OF OUR NEW
STAGFLATION KICKS IN.
TO BE CLEAR, STAGNATION HERE IN THE US. EVEN WHILE CHINA CONTINUES
IT'S "GIANT SUCKING SOUND" IN COMMODITIES INFLATION!
TRYING TO FIGURE OUT THIS MARKET, SHORT TERM, IS A FOOL'S GAME.
BUT, I WOULD CARVE IN STONE THE NOTION THAT THIS IS THE BEGINNING OF
A BAD STAGFLATION!
AND, NOT A "NEW EXPANSION."
OR, A NEW "BULL MARKET," OR ANY OTHER SUCH THING.
Why?
STAGFLATION ONLY HAPPENS WHEN MONEY GOES "FREAKY."
AND, GREENSPAN'S ONE PERCENT SOLUTION EXPERIMENT WAS ABOUT AS FREAKY
AS IT GETS!
WELCOME TO GREENSPAN'S STAGFLATION!
TIME TO PARTY LIKE IT'S 1974! REDUX.
