****** "6. Rats leaving the sinking ship
It can hardly be a coincidence that two of the most prominent and most successful American investors, Warren Buffett and Bill Gross, chose precisely the same moment to speak out very
clearly against their own domestic currency and against investments in US government securities. In an op-ed article in the New York Times on 18 August 2009, Buffett described the Treasurys
current financing problems, with similar assumptions and observations to those of Sprott Asset Management, and lamented the necessity for the Fed, as the lender of last resort, to intervene so
extensively, by means of the printing press. In his own words: The United States economy is now out of the emergency room and appears to be on a slow path to recovery. But enormous dosages of
monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a
long time. Still, their threat may be as ominous as that posed by the financial crisis itself. Buffett fears high inflation, and consequently advises against the purchase of long-term Treasury bills.
Bill Gross of Pacific Investment Management Co. (Pimco), which manages the biggest bond fund in the world, advises investors to sell dollar investments before the central banks and sovereign
wealth funds do. Its time to take advantage of the recovery of the US dollar to get ones currency diversification in order. The somewhat strident commodities specialist Jim Rogers takes
the same line, and also announces his new favourite currency the Chinese yuan. He is seconded, with a good deal more substance, by Hossein Askari, a professor at George Washington University.
In a very readable article in the Asia Times on 6 August 2009, he also advocated a global currency, which would not be allowed to be used to finance state debt or stimulation measures.
Without in any way wishing to overdramatize matters, we do believe that such signals should be taken seriously. In exactly the same way as it is inadvisable to ignore rats leaving a sinking ship.
For they often know the crucial aspects of the ship better than the captain and the officers. The least worst outcome that we expect for the USA, and for the Treasury in particular, is significantly
higher financing costs for debt incurred in the future. We calculate the medium-term contribution by the American tax authorities to this added expense, as a result of the keep foreigners out
strategy described above, at around 50 basis points. And this is precisely the Obama administrations miscalculation. Their aggressive attitude to tax exiles will generate extra funds, perhaps
running into billions, but the price they pay will be exorbitant. An increase in the credit spread of 50 basis points on total public debt of over 10 trillion US dollars represents increased costs of
50 billion per annum. The sums dont work: to make up for this would require additional taxable funds of some 2 trillion US dollars." ******
I Guess the amazing part of this commentary is the fact of what was left out.. Inflation.. I could go on and on about SDR's and the new, newer and / or newest World Reserve Currency being touted as Balck Swan Proof.. but history has made it painfully clear that simply will not hold water.. but back to the point.. a "W" recovery.. is a simple way of saying things that go up will come back down a couple of times before some semblence of normalcy returns... with that said running off the low hanging fruit crowd.. to add more presure prior an inflationary rise in the dollar inadvertantly.. or maybe they just lack the depth to graps the over all field of play.. Either way.. I am buying into a "W" type effect.. the fact that the dollars value will raise based on a run albeit undetermined due to inflation and that it completely lacks mention does leave me feeling less that filled with the satisfaction that this fodder is well thought.
****** "7. Unattractive anyway
Furthermore, the stupendous increase in American debt is by no means a problem only for the Treasury, but affects the economy as a whole. The states ravenous appetite for debt is preventing
private borrowers from getting access to the available finance. This is known as the crowding-out effect. The aim of the Feds quantitative easing policy is to counter this effect. At the same time,
distressed banks, and whole industry sectors, like car manufacturers, are being subsidized with enormous sums, which ultimately must result in further distortions, and crass disadvantages for
the unsubsidized part of the economy. This generally anti-entrepreneurial policy of discouraging investment is further reinforced by wholly disproportionate efforts to intensify the
regulation of small businesses. From the Wall Street Journal, we learn that legislation already exists in Washington that would impose reporting obligations on small venture capital enterprises
exactly those that have powered the rise of Silicon Valley whose administrative burden would be simply unsupportable. And this just because of the concern that hedge funds, which, rightly or
wrongly, are felt to require greater control, might be able to operate in the guise of such venture capital companies. If Washington gets its way, this will mean the end for many small businesses with
10 to 20 employees." ******
The fact that the middle market of Main Street or insert other cutsie name to your satisifaction here __________________________.... is under pressure from larger Credit Worthy, Government Funded Corporations.. is new news where in the world? The fact that the feeding frenzy will continue until such time the illusion of it not being worth the hassel.. (Not forth coming anytine soon)
How many banks have failed.. yet how many Banks have been created.. The Bank of American Express I find to be one of the most entertaining.. I dont know why.. I am just silly that way I guess.
Those well funded (thru Government Dollars / China / Tax Payer Funds) are no causing duress in the market place through the de-leveraging at the bottom of a down cycle not seen in how many decades to turn and fund the buyouts out of Bankruptcy... So the AAA Rated Coproratons are on a buying spree.. (thru funding Appollo's debt or other add name here).. with Tax Dollars after they created the stress in the market place.. they where paid to screw the market place... they are paid to take yet more control of the market place.... and the broader markets be damned..
What has changed? It has become less transparent and harder for the sheepish public to follow which in and of itself is more of the typical progression..
I will say what I have said before.. dont over think it.. its not worth your time...
"Buy Low.. Sell High."
Thats my two (2) cents..
Be well all, JW
