Sorry for the lack of recent posts but I have been preoccupied with other things and actually everything has been going according to script. Stock have not been able to stand up to higher rates and higher oil as my previous posts have commented on. Oil was down over $2 today, so we have a chance for an oversold bounce as bonds rallied a bit as well. Should those two trends continue I think we will get the bounce. But how long it lasts and how far does it carry is the question. It will probably last 1-3 days and not carry past yesterday's highs, pretty weak. Get in the sell the rallies mode, because playing the bounces will be to hard.
The first sign of any economic weakness will see a bond rally, but I grant you it may be awhile before we see that. They are talking pretty good durable good figures for tommorrow. Yes the higher interest rates have helped the dollar and thereby hurt gold. That was to be expected around Fed time. The eurozone having a trade deficit, the first in 22 months I believe and weaker German business confidence gauges don't help either. But gold will be back and I think we are getting close to a buying zone again. Gold is now closer to where it ended 2003 than 2004. The dollar will also come under attack again. The economy is built on frail foundations. We are overextended militarily. We have large budget and trade deficits. We spend to much and save too little. We are overleveraged and underinvested. Our manufacturing base is down to 13% of our economy. Housing has peaked and may be in a bubble. For those who think none of these problems will ever come home to roost and that the piper will never have to be paid, think again.
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Inflation is in the Pipeline
Jim Puplava at Financial Sense Online is telling us today something that Larry Kudlow needs to read:
It is becoming apparent to the financial markets that pipeline inflation is on the rise. Price pressures are starting to show up in the rate investors are seeking as protection against higher inflation. The markets are waking up to the fact that the credit markets are becoming less benign. The riesgo país (“country risk”) is rising rather than falling, which signals trouble lies ahead for the bond markets. Yields across the board are rising once again from Poland to Pakistan, from Turkey and Russia to Argentina and Brazil. Emerging market spreads are up 6 basis points to 369. That’s up from year-end when they stood at 335. Bond investors and politicians in Latin America are watching the U.S. bond markets closely and paying attention to every nuance emanating from the Fed. Rising interest rates in the U.S. means rising rates for most of Latin America. Interest rates are up in Argentina, Brazil, Uruguay, Peru, and Mexico. Junk bond yields are also rising especially after last week’s bombshell by GM.
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