Faith has been lost and gravity laws were shattered. Sun has risen in the West and US Dollar has rallied after initial manipulations crashing all commodities, Gold and Silver. Juniors has been sinking below cash value. Time is to jump if you are leveraged, Bubble Vision has found "new" thing to talk about - Depression and Deflation. We must admit: Decoupling has happen so far only between us and our paper capital gains. We get so much emotional torture that are not sure any more is it Very Bad Already or could it get Worse? All is tighten up now to one simple thing - Fear. US hit the wall so rapidly that all world seems to be ending in front of our eyes. Fear and forced selling have pushed valuations to the meaningless levels, who would look for value when world is ending? Nobody - and we can not do anything if it is true. But there is another One Thousand steps before End of the World which could separate you and what has left from your money if those who run the world will chose to continue the show.
Our strategy is not against USA or any Free Will for that matter (we were positively surprised in our cynical thinking on November, 4th). We are still following the tide. Do not fight the FED. Bankrupt government can not go bankrupt if it is borrowing in its own currency: it can always print more. There is only three way out of trouble for the new positive energy in the falling Empire:
1. Rise taxes, it will not allow to solve the problem (economy is in recession) and could kill any recovery. Little step will be done here. Social unrest and Depression is picture here, back to 1930s.
2. Borrow. It is what going on and will be done next. But you can only borrow some time. Next year budget deficit will reach astonishing 1 trillion dollars. Who will be those suckers to lend? At what price?
3. Print more money, it will be the answer. US will destroy its currency but it is the only way. Clever way will be to use at least part of this money for Infrastructure development. Strong dollar is killing what have left from US economy: you need weak currency in order to stimulate your export when your internal consumers are under water.
Medicine here now is to make the yield curve steeper as soon as possible: it is the only way for banks start to lend and make money, do not touch them, in our plan they are only means of creating wealth in super inflation environment. Banks are borrowing short and lending long in normal economy. You need fast Negative Real Rate: low short term rate "targeted" by FED and higher long term rate determined by the market on 5, 10 and 30 years Treasuries. The more money you print by way of selling Treasuries the bigger discount, higher yield. You are debasing your currency. After you stop to worry about your bank and that the world will end tomorrow you are looking for protection of your capital and risk to deploy it for profit.
I will leave all worries about Deflation to the FED, we will deal with what will come out of their fight with the Monster - Inflation, it will be the same things like in 2003 or in 1970s: "limited" by its nature Gold and Silver as value preservation and Commodities as means to develop and feed the world in EX "Developed and already Obese" societies. Recent developments has brought us into the powerful picture of New Bull Leg if our analyses is right: all even true believers are shaken, pessimism is at its high, Fear just only now is subsiding. Majors are selling at levels of Long World Wide Recession, Juniors at near bankruptcy levels ( and many will vanish for sure).
Now it is important that it will start happening in the nearest future: transition from Fear of Deflation and forced selling to Tide of new liquidity. I will run a few charts which will be important for progress in our strategy.
We can try to be very clever (we did it with reasonable success) and trade in or out all the way. In the end it will not be so important if you are not forced to sell at the Low and not stupid to Buy at the High: Tide will lift you if your boat still in the right place.
Inflation, remember this word, we know how to deal with it, now lets search for The Signs.
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