Kumbu leaves frequent comments. His most recent: "and only one sub sector was up on the day, "Brewers." I'll drink to that."
One other strong stock deserves mention. Gun manufacturer Sturm Ruger has gone up lately.
Some hedge fund managaers are so worried about inflation that they contemplate denominating their funds in gold rather than in dollars!
7 comments:
Smart of them. If assumptions of higher inflation come to reality, they need not even take an active position to show positive relative returns.
Sounds like the hedge fund managers are "clinging to their religion ,guns and gold."
Kumbu -- I'm trying to figure out why you think the Fed doesn't know how to mop up.
Quite the contrary, I believe the controlling interests of the Fed know exactly how to solve the issues at hand, but they lack the will or perhaps the ability to fix it at this time.
This private bank has thrown more than 3.5 trillion dollars (above 1998 fed balance sheet numbers) at the problem using facilities such as TARP, TSLF, TAF, swap lines etc. The end result is that banks still do not have adequate reserves or confidence to lend to business or even to other banks.
The more valid question is why, after throwing 3.5 trillion dollars around, has Fed failed? Two possibilities exist in my mind.
First, the Fed and its private shareholders, and government agencies want to extend the pain and destroy those banks and the former investment banks not aligned with the Fed and further consolidate their power before putting in place polices that will work. Evidence of this might be found in the fact that, while the Fed is willing to go so far as superseded their original 1913 mandate and supply direct injections of cash into the markets but I find it interesting that they are unwilling to reduce reserve ratios. That would of course invalidate their raison d’être and lead to runs on big institutions like BofA and Citi?
Second, further evidence that someone wants to continue the pain comes from the federal government. FDIC premiums have been jacked up massively. Smaller institutions that otherwise would have been profitable, will have to give up all profits this year to bail out poorly run banks like IndyMac. Before all this took place, banks were also prevented from keeping retained earnings on their balance sheet due to tax and federal regulation policy. I actually believe the Fed knows how to fix the problem. There is a lot of evidence like this.
So let me pose a slightly different question. After throwing the mountain of cash at banks, insurance companies and other institutions to no effect, what makes you continue to believe that the Fed has the will or the ability to fix the problem? How much more will it take?
As an aside: I find reading about the Asian crisis (96-98) and the power asserted by the IMF and World Bank over the resolution of that “crisis” has a number of interesting parallels to the current difficulties.
Further to Kumbu's comment -
Easy money is popular with elected officials. The Fed Chairman is appointed and, therefore, influenced by politics.
Deborah:
My post may have the air of a conspiracy theory to some, but I'm interested in your thoughts.
Do you believe it is simply a matter of time until the actions of the Fed gain traction, or are they working at cross purposes with the actions of the government? Is the ship turning and we are simply too naive to notice or is there a missing piece of the puzzle which has yet to be put into place? If you believe the latter, what is the missing piece?
Kimbu -- you got it -- it is just a matter of time for the Fed's actions to work. The govt is orderly unwinding. We can't have 1M people hit the unemployment line in a month, can we? Once that's over and managed, the Fed does it's thing. The world isn't coming to end and the people hoarding gold aren't going to run the world.... this time ;)
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