FWIW – Been a while since Shepherd was featured…
Excerpts Jim Shepherd Nov “Promo” Letter
The balance between QE and Treasury supply will begin to shift in July. The underlying bid it has provided for stocks and Treasuries will begin to fade.
This report tells why, and what to look for in the data and the markets. GO TO THE POST
1. Stocks are soon to plunge, mapping out a pattern similar to what happened in the 1930 – 1932 period
2. The big opportunity in gold and other inflation hedges will come after the deflationary period has run its course and we receive an inflationary spiral. Right now, there is substantial risk of a sharp decline in gold, concurrent with a rally in the US dollar as the stock market declines and fear sets in again;
3. The U.S. T-Bond will be a buy again after the onset of the next selling wave in stocks, and we could see yields cut in half, providing excellent profit potential, before burgeoning inflationary forces require us to liquidate them;
4. The U.S. dollar will have one last massive rally, as the stock market melts down and fear surfaces again; we will have to be nimble, because many of these events are likely to play out very quickly.
From the standpoint of future damage to the U.S. economy, what the Fed has done is despicable. While there is obviously nothing wrong with profit, the fact that trading is being conducted in a much more frantic manner than ever before creates the conditions for an unprecedented collapse like never before.
Right now, you have heavily leveraged banks and investment banks, hedge funds, and other high-frequency traders, all positioned in essentially the same way—to take advantage of the liquidity the Fed is injecting via its QE2 program. Even if the Fed succeeds in lowering rates a little more, it is doubtful any substantial increase in loan demand will accrue, considering the weak condition of most potential borrowers and the diminished value of most collateral.
“As you can see, I have notated the above chart of the Dow Jones Industrial Average indicating the major events that occurred in the period of 1929 through 1932. I believe things are working out remarkably similarly now, and we should not assume that just because certain policy differences or approaches exist now that things will not continue to play out as they did in the era of the Great Depression.”