The Short Report - Nov. 19, 2007 - Eric Janszen

[FRED]

Nov. 19, 2007
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Gold $791 spot
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Oil $94 spot
.
Euro $1.47
.
3 Week T-Bill 3.4%
.
10 Year Treasury 4.14%

Comment: Global central banks strive for decades to "beat inflation." In 1999 they declare victory. They call the tech stock bubble an economic "New Era." In 2001, after the crash, they fret about "deflation." Then they "solve" it with a housing bubble built on bogus bonds. Then the housing bubble collapses.

Only fools listen anymore.

China's trade surplus with the U.S. is too high. Inflation is raging in China. US Congress demands action! Not from the Fed via higher rates or strong dollar policies to increase U.S. national saving, though. No! US Congress says China can solve its inflation problem and cure the U.S. trade deficit by increasing the value of the yuan and cutting its "savings glut." Or else!

But first, it never hurts to ask...



...Dollar Price of Oil: Demand Makes a Contribution...



...Dictators Rejoice...

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...and OPEC Responds.

Economic crash on the way. Inflation relative to The 4th Currency, deflation against all others.

Thank your Congress, President, Federal Reserve, and Treasury Dept.

[GRG55]

Re: The Short Report - Nov. 19, 2007 - Eric Janszen

Economic crash on the way. Inflation relative to The 4th Currency, deflation against all others.

Thank your Congress, President, Federal Reserve, and Treasury Dept.

Well the canoe continues to fill up slowly. Here's a clip from the always sober (sobering?) John Hussman (from this week's commentary which Jim N. usually posts in a more appropriate place):

Critical Point
John P. Hussman, Ph.D.
All rights reserved and actively enforced.

“The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.” - Rudiger Dornbusch, MIT Economist

"Financial and economic conditions are becoming increasingly strained...

...The level of my concern should (and is intended to) strike long-time readers of these comments as unusually high. Over the years, I've consistently emphasized that my discussion of the market's return/risk profile generally does not imply any “forecast.” Historically, every Market Climate we identify includes both positive and negative returns – it's just that the mean and variance (the average return and risk) are different enough to justify varying exposures to market fluctuations. When we adhere to those various exposures over the complete market cycle, our expectation is that we will achieve higher overall returns and smaller periodic drawdowns than a passive buy-and-hold approach. Since we focus on the average return and risk associated with each Market Climate, individual short-term forecasts aren't required, so I usually avoid them.

Still, there are occasionally situations where the set of conditions becomes so extreme that we observe them only before significant shocks. In the past few months, I've emphasized two such “Aunt Minnies;” one related to stock market risk, and one related to recession risk. Accordingly, I've used the term “warning” in recent weeks, which I don't take lightly..."

Link:
http://www.hussman.net/wmc/wmc071119.htm