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

Wednesday, February 18, 2009

The final bubble???

Where do all the Gold ETF's and 2x Gold ETF's get their bullion from? I don't know but it seems to me that Gold swaps are sounding very similar to CDO swaps. I mean stand back and consider what would happen if say somebody bought a house on paper once, sold at a profit, then bought again on paper and sold at profit, then somebody took physical possesion of the house at a artificially high asset price? It would seem to reason that the moment that the market for paper house's crashed, that the value of the real ones would as well. Well Gold is no different.

I stated NUMEROUS times that holding dollars was the correct choice. Well the US economy seems to be screwed, well Ok.. that means that the European economy is gang raped. I read with some amusement, NEW WORLD ORDER by Time the assertion that the Euro will dictate to the US is a fantasy. The ECB should have cut rates and allowed easing:

Austrian financial sector is solvent. However, as Yves Smith at Naked Capitalism notes, Austrian banks have apparently lent as much as €230 billion, or 70% of Austrian GDP, to the ex-Soviet bloc. She quotes at length from a piece by Ambrose Evans-Pritchard at the UK Telegraph:
"Stephen Jen, currency chief at Morgan Stanley, said Eastern Europe has borrowed $1.7 trillion abroad, much on short-term maturities. It must repay–-or roll over-–$400 billion this year, equal to a third of the region's GDP. Good luck. The credit window has slammed shut. …

'This is the largest run on a currency in history,' said Mr Jen.

In Poland, 60% of mortgages are in Swiss francs. The zloty has just halved against the franc. Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this story. As an act of collective folly – by lenders and borrowers – it matches America's sub-prime debacle. There is a crucial difference, however. European banks are on the hook for both. US banks are not.

Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks. En plus, Europeans account for an astonishing 74% of the entire $4.9 trillion portfolio of loans to emerging markets. …"
Ms. Smith reports that the Austrians are allegedly confident that Berlin will bail them out. Meanwhile

See my initial paragraph from my last blog..

Yep I called the dollar correct and still say that Gold at the end of the bubble will be no good if you take physical possesion, when the deflation persists there are less dollars to pay for inflated gold, when the recovery finally takes hold and that could be some time from now, the value to safety will drop gold as it has done before.

On the record I supported the stimulus plan and know that it is neccessary though certainly imperfect. I would have held my nose and voted yes.

Awhile back I mentioned 7300, I think that that number is the actual support number and currently (post 3/15 bond data) a good number. I expect that the recovery will require more assistance and that areas of progress will finally emerge in three years as the short end of the bond market comes due.

I will not be using my old blog name of deflationelation.

I own that one as well.. and used that in the GE forums to criticize a CEO who thought he was MIDAS as we were in well.. a bubble.

yep, deflation was the result.. buy a bubble at your own risk and don't expect a bailout if that bubble is gold.

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