Thursday, December 3, 2009

You Don't Have a Chance

"Caus' if there's one thing I can't stand, it's standing next to my fellow man...."
About to Break, Third Eye Blind

Fresh off of eating stuffing, twice-baked potatoes, and assorted pies every meal for a week, I feel spry enough to offer up another entry. Between Thanksgiving and working on a series of essays about the joys of fatherhood (ironically as my daughters have croup again), I've been content to sit back and watch gold gather steam while the market continues to rise. This, in light of the Dubai crisis, anemic sales, and the doldrums of unemployment drying up credit faster than at any point in history.

If more collapse is waiting in the wings, we'll be the last to know, at least sudden collapse. Sixty billion dollars of debt really isn't that much to fuss about, given the monthly totals the U.S. is racking up. Given the daily demise of the dollar as a premeditated solution for keeping our goods viable. Given the grave this market has returned from. And the right to predict sudden collapse has become too expensive. Buying puts on the indices carry ridiculous premiums even at 20-25% OOM.

So, what are we left with? I still say metal and oil, and in the not-too-distant future, all commodities. But as The Mixx recently asked me when I pointed to the success of gold, why? Where is the money coming from? As Caroline Baum points out in her Bloomberg piece yesterday, it sure as hell doesn't look like new money.

"There is no sign of excess credit creation on U.S. bank balance sheets. From October 2008 through October 2009, bank credit fell 5.3 percent. That reflects an 8 percent decline in loans and leases and a 3.4 percent increase in securities. Within the securities category, Treasuries were the clear winner, with a 13 percent increase......When I hear folks like New York University Professor Nouriel Roubini talk about asset bubbles and “money chasing commodities,” I want to ask, what money? Where is all the money chasing stocks, commodities, high-yield bonds and emerging- market stocks coming from if it’s sitting in banks’ accounts at Federal Reserve banks?"

So it's sold-assets that are acquiring gold and silver, not the fresh flow of credit. And I see no reason for this paradigm to shift given the helium-high U.S. market.


Tiger Coach said...

Dear Ax,

I this whole rally may not be predicated insomuch of a bubble that is created, but more along the lines of toxic debt that was moved from bank balance sheets to the Feds... I am sure there will be a scheme unhatched as to how they can buy these assets back when they are less toxic...

Regulations? Changes? New Laws? Jail times? Where is the reform?

The Mixx said...

Anybody amused at the news that the bailout won't cost as much as they thought? Because they're using free Fed money to pay it back. The banks won't even dignify average Americans with creative lies.

AX said...

We truly are the pawns...anyone getting new loans out there? And the bailouts...BAC and Citi ready for payback, that's right, with Fed money...ridiculous