Trade of the Decade
Source: The Daily Reckoning Australia (1/11/09)
"The only things that went up last year were gold and U.S. government bonds."
And now we face a grim task; for now we have to reckon with the year ahead. Stocks are no longer absurdly over-priced. Nor is oil. Nor is anything else—with one major exception—U.S. Treasury debt. Should you buy stocks, or sell them? Should you buy more gold now, or wait for the first signs of inflation? Is it time to buy the oil producers, or the gold miners? Will the world economy sink into a Japan-like slump, or will the feds cause a Zimbabwe-like catastrophe? Every day, our heads ache trying to figure it out.
When America's economy was young and competitive it survived slumps and crashes without medical intervention. Now, every passing cold requires feeding tubes. And this latest bout of influenza has the doctors in a panic. They are casting aside warnings and giving the patient masses doses of the old quack treatments. They'll increase the dosage—until they run out of supplies—and then switch to those new, experimental medicines that have recently been used in field trials by Dr. Gono in Zimbabwe. Since they cannot leave well enough alone—the public won't stand for it—they will keep giving bigger and bigger doses, of more and more dangerous medicines, until the patient dies.
When? How? We wish we knew. But yesterday, we got word that the European Central Bank has found a way to do what the U.S. Fed is already doing—buying up government debt. As you may know, dear reader, when central banks buy government debt, the money supply increases directly.