Monetary policy is not very effective during periods of mass deleveraging. A sound fiscal policy geared towards job creation is where our leaders should be focused. The politicians don’t seem to understand that a steroid shot of quantitative easement has little effect on the economy other than to raise the price of commodities and devalue the currency along with the lingering effects of increased debt. So now we’re hearing talk that QE 3 is imminent which is propelling the price of Gold, Silver and bond prices higher. How many attempts at QE will be attempted before politicians determine that perhaps this is not the most effective method of boosting employment or housing? My view is that Bernanke and the Fed alone cannot boost employment and our political leaders are less than helpful with self destructive partisanship. This may serve the Republicans as I don’t believe they intend to cooperate with our President and actually intend to bring about a lack of cooperation that will stymie any effective fiscal policy in the hopes that crushing the US economy will spur a Republican victory for the Presidency in 2012.
Trading comment: The Dow is down 255 at present while GLD is up $5.17, SLV is up $1.65 and the SDS is up $1.25. Since we have a high percentage of cash on hand in client portfolios, our accounts on average are positive for the day despite the losses in stocks.
The leadership in Gold and bonds is troubling and its possible that the retest of the lows is near. Time will tell.
Long all mentioned