Friday, August 19, 2011
- My Post-Vacation Take On The World
My vacation technically ends tomorrow, but we're going slow today. So this is just a few short comments on the things I've been ignoring all week while my daughter and I bobbed around in the 90 degree gulf of Mexico.
There is no deal that will save them. There is no meeting and no magic. There is no rabbit left in the hat. Europe's political leaders will dither and delay in the hope that some opportunity will be revealed but it won't be. They've run out of rope. All they have left is lies and deceit. They have to make a choice. The Germans have to choose between inflation (a Germany funded bailout to save the Euro) or the collapse of their export sector (Euro abandonment and the return of the D-mark.)
That's it. Choose something and spare the rest of us the grief.
The US Stock market:
Currently being driven by Europe. As they stall deceive and delay, we suffer.
At 1050 for the S&P, QE3 is all but guaranteed. We aren't there yet. And because that's so, I'm betting that Bernanke does not provide any stronger indication of QE3 at Jackson Hole. The market will respond to that by running south. When it gets to 1050, he'll be in a better position to change his mind.
A buddy of mine who is a fairly big commodity trader, is telling me that there is some substantive talk about the financial transactions tax. He likes it because it will kill HF trading, but I personally think it's economic suicide - especially for the Europeans. Like a short sale ban, it's a desperate act of 'know nothing' politicians who are trying to trick their markets into rising without any meaningful policy change. Honestly, I'm not sure this 'substantive talk' is real. If so, I'll comment further next week.
I think it's still cheap. All of this gain has been due to the Euro collapse, and only a little based on QE3. I would expect at least another $100 per oz when QE3 becomes real, followed by a pullback which will provide a real buying opportunity. Remember, the real inflation will happen after we start growing again.