Friday, December 4, 2009

The Great Collapse

I posed a question to myself... Usually, a scenario where a market overwhelmingly believes that something is clearly amiss is never seen.
The correction usually happens before a large section of the market can act.
Currently, a lot of opinions show that the equity markets are too high.
This is in addition to gold having galloped recently and 10 yr treasuries in the low 3%s.
Currently, the only answer I can come up with to explain this 'irrational exuberance' is that a cartel comprising of leading financial powers could be in operation.
I believe that extensions are being extended and a domino effect should start that would take the entire world into an unreal collapse.
This dude (John Williams at Shadow Stats) has dubbed it the Great Collapse.

And I am, very frankly, very afraid. I am certain that highly abnormal things should transpire in the coming months and I am trying to figure out where best to allocate money.
Gold looks like the Nasdaq or Nikkei before their respective collapses.
Some say that relative to USD being overbought in case of a massive sell-off, even the JPY should be a good buy, because in the short term - that is where the money flows.
However, the historic behavior of the USD, I believe, will not hold into the coming months. In contrast, the JPY should because it is where a lot of money has originated, it is where the Japanese bubble has deflated in the last 25-30 years, and so it is a bit like a walk with stilts inside quicksand. You go nowhere really, but you know you wont drown.
I grow worried with how inflation will portray (for lack of a better term) itself. Will it flow to gold prices? Will food prices shoot up? I doubt it will flow to oil, for oil is something that will be demanded less of in case of the Great Collapse.

The issues with gold are that it has already skyrocketed,
Nobody knows how much gold there actually is out there - however one could be reasonably certain that there is not too much of it out there,
Nobody knows the consequences of the US dumping their (supposed) reserves of gold onto the open market - although I have a belief that that in turn would stoke inflation and a greater mistrust in the power of the US & D,
And let's face it, gold is a pretty useless metal. It is only the value that humans have assigned to it that makes it so great. Then again, it has better value than paper notes :D

I believe that yields across the board should shoot up...

And there is this weird issue with inflation.
One thought tells me that all the hot money is going to flow into assets of many natures.
Another thought tells me that people are going to take their money and sleep with it in their beds - which would initiate the dreaded deflationary spiral.
I may be very juvenile in my framework but I also think I am very logical in my chain of thoughts.

Just want to say - All the best.

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