The Next Bubble
If you were long stocks and long the USD it was not a good day. The DJIA finished down 249.97 and the USD Index finished at 79.96! That’s the lowest USD close ever (if you know a lower close let me know).
The Current Crisis Posted On: Friday, September 07, 2007, 4:32:00 PM EST by Monty Guild is a very provocative read. Guild writes that the role of the banks has been to provide short-term financing to businesses, you know, to fund cash flow needs. Then companies started self funding by issuing commercial paper. Now that market has locked up. There is little appetite for that paper and short term yields like the LIBOR rate are higher than Fed Funds and Treasuries. In addition, the banks are trying to get their business back by husbanding liquidity. Guild writes,
Banks know they are going to have to keep their customers operating without the commercial paper market so they are hoarding capital to do that.WHAT THIS MEANS FOR THE WORLD MARKETS IS THAT A FLOOD OF LIQUIDITY IS COMING
The Federal Reserve and all other central banks will make capital available through the discount rate and other mechanisms allowed to provide liquidity short term and long term to banks. Central banks have become increasingly pressured by political events and that pressure will cause them to create a huge liquidity response to the current crisis.
In 2000 the high tech bubble created by the FED deflated. The FED created the liquidity needed, but a new bubble was created, Real Estate. Now that bubble is deflating, but the new liquidity will have to go somewhere. All that excess liquidity sends the value of the USD lower. So where does the smart money go to protect themselves?
Monty Guild writes,
In the short term there will be a recession in the US and world economic growth will slow from its current torrid pace to a moderate pace. The long term effect is more bubbles in many asset classes; gold, other precious metals, some well managed non-US currencies, commodities and probably stocks in fast growing sectors of the world.
Get smart! Don’t wait until the MSM media writes glowing stories about the killings investors are making in the next bubble. Do some homework and position yourself today.
Credit Bubble
I am wondering how much gold is moving on the market right now.
I have always personally stayed with buying silver. Just my personal preference.
But right now, I have this urge to buy gold which would be crazy at this high price.
Makes me wonder if there is a bit of a manipulated panic to buy gold.
On the other hand, it may be a wise move, even at the high price.
Sorry, I forgot to add this to the end of my comment:
Perhaps the Amero, if there is such a thing, will be the new bubble.
My friend Bill Murphy writing at Le Metropole Cafe, believes the price will go to $3,000 to $5,000 an ounce. I agree with him.