"Now look at them yo-yo's that's the way you do it
You play the guitar on the MTV
That ain't workin' that's the way you do it
Money for nothin' and your chicks for free"
You play the guitar on the MTV
That ain't workin' that's the way you do it
Money for nothin' and your chicks for free"
Man I hate this. I hate buying stocks here just because my indicators tell me too. And why are they telling me too? Because of the "Money for nothin'" Bernanke Put. You remember the Bernanke Put, right? That's our Federal Reserve telling us that if the economy doesn't start to improve soon then they will begin printing money again (QE2) to buy bonds, resulting in even lower yields, and a devaluing dollar. This Fed engineered inflation is causing equities, commodities, and gold to all appreciate. All of my indicators have turned to maximum bullish.
Now I have nothing against being fully invested and making money, actually it usually makes me pretty darn happy, but not today. No, this move to fully invested makes me uneasy. Uneasy because it is being engineered by men who are playing with something much bigger and smarter than they could ever hope to be. Engineered out of hubris. "Now that ain't workin' that's the way you do it."
No, when I am happiest being fully invested in equities and commodities is when the economy is growing due to capitalism, not due to government manipulation. Remember the good old days when you made investments into companies because they "earned it"? Hopefully we'll get back to those days again in my lifetime.
In the meantime I'm following my models and disciplines, holding my nose, and buying stocks and commodities. Our philosophy is to be in harmony with the markets, not trying to force our will or beliefs onto the market. I'm fully invested, but I'm not putting a lot of faith in our not so humble servants in Washington to get it just right. We're keeping them on a tight leash. "I shoulda learned to play the guitar."
Where do we stand?
US Equities --
Bullish
Int'l Equities --
Bullish, both developed markets and emerging markets
US REITs --
Bullish
Int'l REITs --
Bullish
Gold -- Bullish, record highs
Commodities --
Bullish
US Fixed Income -- Bullish, record highs and overbought
Int'l Fixed Income -- Bullish, and emerging market debt Bullish
Cash Equivalents -- Nearly 0%
Socialization Of Credit:
Jim Grant is one of the most articulate and intelligent financial writers of our time, and his "Grant's Interest Rate Observer" is a must read. The other day Jim gave an interview to Bloomberg's Pimm Fox that was both informative and entertaining. He didn't mince words when he said that we are well on our way to the "Socialization of Credit." But I also enjoyed his discussion of H. Parker Willis, one of the founders of the Federal Reserve in 1913, who in a book written two decades later laments the very existence of the Fed. As Grant says: "Willis was present at the creation of the Fed, he was one of the draftsmen of the Federal Reserve Act of 1913. Willis was also the first secretary of the Federal Reserve Board - he knows this institution. He wrote a book in 1936, which was a lamentation about the low estate of Central Banking in America, the Fed had lost its way in 1936. It had opened its doors in 1914 and by 1936 it had eaten the forbidden fruit, it was in the business of guiding the economy, of managing the economy, of manipulating this aggregate and that, and Willis said: "For Pete's sake. You can't know that - the GDP data are not reliable enough for you to do what you think you are doing." It's a wonderful tract against the tendency of the Fed to do what it has so lethally done to this economy in my opinion, which is to steer us, in the interest of raising the GDP it presses interest rates to zero, pouring out immense volumes of econometric studies in support of this dubious enterprise. You've heard of mission creep, these guys are the mission creeps par excellence."
Wow, when even cool, calm and collected pundits like Jim Grant rage against the machine known as the Fed, maybe we should listen. Central Banking has become Central Planning on a massive scale, and that generally doesn't end well.
The Fed's "Money For Nothing" Policy Is Screwing Savers:
Charles Schwab has recently written an excellent editorial for the WSJ calling for an end to the Fed's Zero Interest Rate Policy (ZIRP). We couldn't agree more. ZIRP has been hosing responsible people living within their means and trying to save a bit for three years now.
People who save are being screwed, while those who borrow are being rewarded. How much is the Fed's "Money For Nothing" policy costing savers? Well, as Charles Schwab notes, there is more than $7.5 trillion sitting in FDIC-insured savings accounts (not including trillions more in money market accounts) earning nothing. At a more normal 3% interest rate that money would earn savers $225 billion a year. These earnings could then be reinvested or spent as the savers chose.
The Fed believes that ZIRP will stimulate the economy...it's not working! Lets stop penalizing the responsible savers, and try something different.
Be careful out there, and keep the light's on,
Chris Wiles
For prior Rockhaven Views visit:
This article contains the current opinions of the author but not necessarily those of the Rockhaven Capital Management. The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
No comments:
Post a Comment