Friday, March 20, 2009

Updated Forecast

My thesis has been that prices would decline due to deleveraging but the government's inflationary policies would eventually cause nominal prices to rise. It's difficult to time a zig zag of prices going down then up, but it looks like we're turning the corner. The Fed's announcement that they are going to print a Trillion dollars and use it to buy debt is the proverbial "crossing of the Rubicon" The US Dollar is toast. I think the trigger will be some of the smaller holders of Treasurys (Singapore, for example) trying to dump their holdings before China does. This will cause a panic stampede out of Treasurys which will destroy the dollar.

Do not abuse leverage. The Fed is going to spend limitless amounts of money to pound interest rates and Gold prices into appearing "normal" when in fact they are on the verge of exploding. The tremendous volatility will shake out leveraged players.

No comments: