That Giant Sucking Sound

Years ago a very successful American entrepreneur coined the phrase "That Giant Sucking Sound" concerned over government policy..... he feared for America. This week the gang running WDC, LLC will take yet another $100,000,000,000 (that is $100 billion) from the global capital markets to fund what they call deficits. We call them losses....so do businesses and the American people.

It should be no surprise restaurants are closing, people are flying less, buying fewer cars, building fewer houses and most importantly businesses are hiring nobody. Why? Because if they ran their companies or households the way government is abusing it's power they know they too would be bankrupt. So we have the stalemate......and nothing is going to change these trends until this debacle is resolved one way or another. The entire world is quickly reaching a boiling point....without any leadership...... at the worst possible of times.

We are impressed with a rare consensus of smart market technicians who are now universally bearish and calling for dramatic new lows in the equity markets. Starting this summer and capitulating early next year. In other words taking out the lows made in March of this year.....

We tend to agree and fear once any confidence is lost in the US Dollar or the perceived safety of treasury debt.....the gloves will come off. The 20 year treasury is down 25% year to date. Cash in US Dollars is down 2% year to date relative to a basket of other currencies. Cash versus Gold a better gauge of inflation is down 4.8% or in other words inflation is running around 4.8% so gold is higher by that amount.....and of course the stock market is down.

So an easy summary would show the two most crowded favored "trades" are cash and bonds....both losing more money that the current stock market!

The two schools of thought on the current great recession are a) classic de leveraging from decades of borrowed money spending (paying back/ down debt). OR b) A classic reversal of a return to a higher personal savings rate..thus less spending. Both of course result in inventory draw downs/ or terminations (shut in of supply) which has been dramatic to say the least as supply of almost everything is dwindling fast.

We of course challenge this thinking.....debt has never been rising faster EVER. There is no business or person who can compete with the nonsense in California or WDC. One is already issuing IOU's the other will be soon. Then what? This is Ponzi times 1 million!!

Careful if you work for the public sector. Their job losses are just getting started as the bureaucracies there are in the early stages of being terminated, cut back (permanently) and all benefits and perceived pensions will not be honored. By the way the pubic sector is probably the largest employer in most cities or states you live in.

Follow the leader! What has China been doing the last five days? Buying hard assets in other currencies all over the world. Coal, oil, steel.....billions!!

For fun click on http://www.usdebtclock.org/

Danny Boy seen here is starting to hide a bit...funny how animals can feel or see the storm before it arrives.