THERE SEEMS TO BE A COUPLE SCHOOLS OF THOUGHT ON THE "LIQUIDITY BUBBLE" THAT THE FED HAS CREATED...
THE SPECULATORS ARE HOPING THAT ALL THE "NEW MONEY" RUSHES INTO STOCKS OR REAL ESTATE OR WHATEVER...AND RESTORES THE BUBBLE ECONOMY OF THE LAST DECADE OR SO...
EXACTLY HOW OR WHY THAT HAPPENS IS NOT EXPLAINED...BUT IT IS RECALLED THAT AFTER THE DOTCOM BUST... MONEY EVENTUALLY POURED INTO REAL ESTATE AND CREATED THAT "NEW" BUBBLE...
BUT OF COURSE REAL ESTATE WAS AN ESTABLISHED ASSET CLASS BEFORE AND AFTER THE DOTCOM BUBBLE...
THIS SUMMER THERE WAS A COMMODITIES BUBBLE IN OIL, GAS AND GOLD TO MENTION ONLY A FEW...
THAT ENDED WITH THE COLLAPSE OF REAL ESTATE SUBPRIMES...AND THE HEDGE FUNDS RUSH TO LIQUIDATE THEIR LONG OIL AND GOLD POSITIONS...
NOW WE SORT OF HAVE A BOND BUBBLE...AND/OR A LIQUIDITY BUBBLE
SO WILL MONEY "SLOSH" BACK INTO STOCKS ...? OR GO ELSEWHERE...
COULD IT BE THAT THE BUBBLE DAZE HAS ENDED AND THE AMERICAN EXCEPTIONALISM THAT HAS ALLOWED THE DOLLAR TO BE PRINTED WITH ABANDON HAS ENDED...?
WELL...THAT IS THE BIG DEBATE ISN'T IT...
I TEND TO GO WITH THE LONG TERM, MACRO AND ACADEMIC VIEW...THAT PRINTING MONEY...WILL BE INFLATIONARY... AND REMEMBER ONLY THIS SUMMER THAT "DOOMSDAY" BET WAS COMING TRUE...AND PAYING OFF BIG TIME...
THE SPECULATION CAMP...AND FOLKS LIKE LARRY KUDLOW ETAL...SEEM TO THINK THAT THIS TO WILL PASS...
AND STOCKS WILL BUBBLE UP AGAIN AS BEFORE...AND IT WILL BE OFF TO THE RACES YET AGAIN... NEVERMIND THE DEFICITS AND DEBT AND EXCESS CASH... THE CASH AT LEAST IS "TRAPPED" INSIDE WALL STREET...AND CAN'T "GET OUT" TO THE GREAT UNWASHED...WHO HAVE TO RELY ON DEBT TO FINANCE THEIR CONSUMPTION HABITS...OR FIND A WAY TO PARTICIPATE IN THE NEVER ENDING BUBBLE STORY ON WALL STREET...
AFTER ALL THE GREAT UNWASHED...DID WELL WITH THEIR "HOME EQUITY ATM" UP UNTIL RECENTLY...
BOTTOM LINE... THERE IS ABSOLUTELY NO EVIDENCE THAT THIS ECONONY IS OUT OF THE WOODS ON ANY LEVEL...AND THERE IS PLENTY OF EVIDENCE THAT THIS IS A GENERATIONAL COLLAPSE THAT WILL DO REAL DAMAGE...
WASHINGTON'S ABILITY TO PRODUCE ONLY ASSET BUBBLES AND NOTHING ELSE IS UNSUSTAINABLE...
WHERE WILL THE MARKET GO TOMORROW...OR IN 2009... WHO KNOWS...
BUT I WILL STAY IN CASH AND GOLD UNTIL THE FRENZY ABATES...AND PITY THOSE WHO HAVE LOST SO MUCH ALREADY...
DO YOU REALIZE HOW MANY FORD AND GM WORKERS HAD THEIR LIFE SAVINGS IN THEIR COMPANY'S STOCK...!
THE PROBLEM IS THAT TO "ROOT FOR" GOLD IS TO ROOT FOR A CATASTROPHE OF UNTOLD PROPORTIONS...
AND A DOOMSDAY BET IS NOT A "FEEL GOOD" POSITION TO BE IN... BUT THERE IT IS...
