Plus ça change plus c'est la même chose!
WASHINGTON: SOVIET CAPITAL
Spurned lovers, BANK-rupts speculators and traumatized retirees need to learn to believe again that the future will be brighter. Yeah right! 100 days into the election, Communist Washington now gets to fire CEOs and whole boards on behalf of taxpayers!
Pretty soon Putin types cronies will be parachuted all over industry to "Protect" taxpayer money... Soon enough you will have to show your party pin and pledge allegiance to "ze Republic". Sarko (L'énervé français) gets into the act by firing Peugeot president...
GM chief smart ass gets $20MM to pass the buck and the whole Citi board is to be replaced on orders of the politburo. What will that change, if anything? It didn't work for countless other government interventions. It won't work now!
GOOD LAND GONE BAD
Good banks and good corporations should be compared to fertile land. Farmers (investors) will come in and sow savings in the hope of gaining future rewards. If the stewards of the land (CEOs) use the wrong fertilizers, plant the wrong types of seeds at the wrong time, prefer goosing profits for the short term, the land can and will eventually become barren if not toxic. Bringing in the sheriff (Barak) and say that the "toxic" land could be saved by printing money, is just plain DUMB. It is much cheaper to declare the land toxic NOW, and start anew. WHY isn't the administration doing more to encourage NEW banks with NEW bankers to go into business instead of trying to FUND CORRUPT BANKERS to lend to a CORRUPT SYSTEM?
Sorry to bust your ideological bubble but the system is not going to fix itself when NOBODY gets paid to DECLARE ASSETS TOXIC and it's not with BOG (Bernanke Obama Geithner) DOWN economics that things are going to fix themselves. IF PEOPLE WHO AGREE TO TAKE ON TOXIC ASSETS CANNOT HAVE THEIR RISKS REWARDED AND PROFITS GUARANTEED, this fiasco will continue a la 1990 Japanese for quite some time WITH the added cherry of INFLATION on top.
INFLATION IS A BADLY DESIGNED TURBOCHARGER
Think of all this money printing action as a terribly designed turbo charger which lags a full 4 seconds after you press on the gas pedal. Design to kill, it finally kicks in a 60 degrees curve... Want to venture to guess what happens next? If the brakes are not strong enough to hold the surge in power (money supply) , you are going to go off in the blue yonder... NO FED CHAIRMAN HAS EVER CONTROLLED INFLATION THAT HE GENERATED BY QUANTITATIVE EASING ( money printing for people in search of exotic sounding words)... To be disingenuous, Barak could fire Bernanke right now to prove himself right and me wrong but the current comrade in chief and his predecessor have something in common: they show loyalty...
WHAT TO DO
With Oil heading precipitously below $50 and Gold hovering below $920, my bet stands: Convert your euros NOW, Buy PHYSICAL GOLD and keep shorting US treasuries. WITHIN a year you will be rewarded. While the Europeans will prove to be more inept at keeping their retirees from freezing next winter, Our bets and repeated vote of no confidence in the administration will make sure we spend the winter in Phoenix enjoying the balmy weather.
ON THE RADAR
Now the big issue is corporate bonds... we already alluded to major refinancing required in Germany this year and massive amounts in the US 2012-2013...
Convertible debenture market is going to be interesting but it won't be for amateurs.
With 12% real inflation in our crystal ball, HOW can you price a convertible to have a good bet going?
We will study this in coming weeks.
Good trading to you!
DCW
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