Follow The Money

Money has flown into all asset classes, stocks, bonds, derivatives, real estate, commodities, junk bonds, currencies. We saw an interesting question today....."what would you rather own 11,000 Dow points or 11,000 ounces of Gold?"

The question is of course related to the unchecked credit (debit) creation that has to be balanced with asset appreciation as well..credits as well as the debits. Most people don't look at both sides of the equations and get all caught up in either the bear case or bull case of the economy or policies because of their narrow focus.

Ronald Reagan would talk to audiences about hundreds of millions dollars saved here and there and made the comment that people would just look at him all glazed over with polite applause. Then one day he told a group of businessmen in California that the state saved $200,000 by sending motorists their license renewal notices before a postal rate hike. Suddenly the audience was on its feet roaring with approval. "Two hundred thousand dollars they could visualize, two hundred million, they couldn't." What a great point.

All the law makers in WDC and the liberal press have no idea how much $1,000,000,000 dollars are... much less how it is earned, taxed and spent. Nor will they ever.....the scale is simply to large for people from everyday life to rationalize.

What is for sure is that current credit creation in the derivative markets are not understood by policy makers, endowment funds, pension funds and institutional money managers.....on a good day there is simply no information to come by.... The debt markets are making important lows (higher interest rates coming) as the markets continue to assume a "Goldilocks" scenario and under-prices the cost of capital. Pending volatility will begin to slow the pace of this synthetic creation of paper...and their inherent risks..

Fashions of investing come and go... so don't get too attached to a trend.

Danny Boy seen here in the emerging daylight still -17 degrees outside, but he knows his first spring is just around the corner!