This site has featured evidence of economic weakness in the U.S. for some time, basically since last spring. Now that the Fed agrees so heartily as to add QE on top of Operation Twist, I start looking for buying opportunities in economically-sensitive assets; this being a total reversal of the stance I adopted in May of 2011. (Since that time, the New York Stock Exchange Composite Index is flat and the zero coupon 30 year T-bond has had a massive and totally unremarked upon total return.)
Here, for example, is a cut and paste from RealClearMarkets tonight:
Global Economic Distress 3.0Looks pretty scary, correct? (No surprise, given the headline on gold, that gold is down 1% as we speak, LOL.)
Typically these are times to ignore the fear that is being promoted, at least short-term and often long-term.
The monetary inflation that the Fed is creating must by definition go somewhere. Why not stocks and physical, unprintable commodities?
Why not indeed.
The real question is “When will the demand for dollars end?”. No end in sight.
All currency valuations are relative, and the US may remain the best of a bad lot. Stocks may remain attractive for the simple reason there’s no where else to go for yield, but it’s like eating bad sushi because the alternative is rotten squid.
China’s consumption of 40-60% of global commodities is not just a red flag, it’s an elephant painted neon red, covered with glitter plummeting to earth at terminal velocity. So watch yourself.
It would be interesting Doc if you did a piece on the “Whatever happened to the Japan carry trade?”. I recall about 2006 that was touted as one of the main reasons for commodities rise. Has it been usurped by the FED?
I was thinking more of gold, Yoda, than iron ore that is piled high in China. But, it’s a big world, and as China may head into an economic funk for a while, well– Jim Rogers is now bullish on Russia. Then there’s Brazil. And don’t forget the sleeping giant of Africa. TPTB will keep on keeping on, I just don’t know all the venues.