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.

http://www.bloomberg.com/apps/news?pid=20601039&sid=avARgMioihVQ