Saturday, September 25, 2010

Up Tick Or Buyout?

Stocks are up for the fourth week in a row.

Stocks closed higher for a fourth straight week Friday, extending a September rally with huge daily gains fueled by optimism over the future direction of the economy.

The Dow Jones Industrial Average was up 8.4 percent so far this month, putting the blue-chip index on track for the best September performance since 1939.

On Friday, the Dow rose 197.84 points, or 1.9 percent, to close at 10,860.26. For the week, the Dow was up 2.38 percent.
Good news? Or something else? Michael Pento has some thoughts. In fact he had these thoughts in late August. this interview with Eric King, Michael Pento makes the case that as opposed to the occasional market intervention via the President's Working Group, Bernanke will soon make stock purchases an outright policy of the Federal Reserve as its last ditch attempt to engender inflation before the hundreds of billions of Commercial Real Estate and other bank debt start maturing in 2011/2012. Bernanke is running out of time and he knows it. And once the Fed becomes the bidder of last resort in stocks, all bets are off, as the Central Bank will become the defacto only market in virtually every risky category. And the only safe vehicle, once the market then begins to price in Fed driven asset-price hyperinflation, will be gold.
And what do you know? Gold has reached a record high and that was on Wednesday. As of Friday there was no significant pull back from the record.
The metal is benefiting from concerns over the stability of the financial system and the outlook for fiat currencies. While dollar weakness, a typical driver of gold, is lifting prices, the metal's appeal as a safe store of value has broadened.

"This is not just about the dollar any more," said Pau Morilla-Giner, senior portfolio manager and head of alternative investments, equities and commodities at London & Capital.

"This is about any currency that is used and generated in a country with massive dislocations, an excess of sovereign debt and a weak banking system. And now, for the first time in history, all major Western currencies have that problem."

The dollar hit its lowest since late April versus the euro on Wednesday after the Fed signaled it may introduce fresh measures to bolster a sluggish U.S. recovery, opening the door to pumping hundreds of billions of new dollars into the economy.
Uh. Oh. We are starting to enter Jimmy Carter territory. Wouldn't it be ironic if the Resident made Jimmy Carter look like a moderate? Well other than the honor of being right I'd just as soon forgo the pleasure. Because it will hurt. A lot.

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