This is the truth, nothing but the truth, and the whole truth, with a waterboard as my witness!

Sunday, December 28, 2008

End of Year stuff and that sort of thing predictions and recollections stuff

The year ended as it started with Hedge funds blowing up. Back in January I proposed succinctly that deflation was upon the economy and that of course has been the story of 2008.

The coughing up of phlem over in the European Union will make the idea of having gone bourse with the ERU a political nightmare. Those same Asians who sold USD will come running back to the USD as haven, and the current momentum in FOREX the last ripples of a bubble gone bust from the 90's. As deflationary segments of the fallout occur the spot price of Gold will drop, and halting production will not keep the price at a high enough levels to support the 'financing' of metals extraction. Lower consumption will result in lower oil and Chavez will find himself along with Iran in a trap, not the dollar trap that they imagined, no instead the realities of 'unintended consequences' of an attack on the dollar, and the resulting consequence of the destruction of their alternatives. Watching the greater fool theory in Gold will be fun, cash assets USD will be key to buying depressed real property in stable economic zones. And China with it's pollution and challenges best recognized by Diamond in collapse, will demonstrate why they should have harmonized as well, and that deflation (or to many dollars chasing too many debts) will be the result of that unrestricted growth, and an inability to purchase 'real wealth.'

My bet.. get ready for the whiplash of the century, there is no market unless there is the opposite side of the trade. :)

And that has been this year where the opposite side of the trade has prevailed.

I don't do the gloom and doom thing.. but really when you looked at the fundamentals this was cooked-in as an outcome.

My hypothesis is simple, no matter how screwed up one thinks the US is, one needs only to do some limited travel to see how screwed up the rest of the world is.

So the year ends as it began, with the lone wolf and rogue trader narrative, as if the systemic issues of credit are not the larger problem? As if the Madoff scheme hadn't done well until credit collapsed?

My precition is simple, Gold is over-bought and still a bubble. That aside from US dollar cash positions your money is at risk, and that the shoes about to fall are abroad. On loosely regulated investments, hedge funds, etc.. I supported the TARP but now get a sense that it has gone astray in it's focus. Beyond financial institutions that were registered as such prior to the creation of the Tarp fund, there should be no bailout.

Sooner or later the FED has to say no. And when they do? You will see the strong dollar return. It will happen faster than one might imagine, there are too many funds out there that will implode. The Derivatives market cannot be bailed out, and the math behind that assertion a certainty. Tarp exists for Main Street and not Wall Street and I see that fact as a 2009 certainty.

But as the year ends, think of how the year began. It seems that everybody knew that there were open ended and uncovered positions littering the street, nobody seemed to care, but now there is no covering the facts. It is not a proposition of libor rates, it is a proposition of uncovered positions.

Here is some no-brainer predictions, and I'll add another, go long on home gardening in 2009.

Happy New Year, don't follow the lemmings, and don't drink the koolaid.

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