Tuesday, November 3, 2009

In the beginning..

Thanks for stopping by !! This blog is about the worsening macroeconomic news of the world and exactly what I'm doing with an imaginary $10,000 trading account to see if I'm actually any good at this. I'll be posting what I'm investing in (and why), results on a weekly (or so) basis, as well as some news here and there and how I think it might affect your investments.

Today I'll start by putting 100% of my $10K into Pimco's Bear Fund (PSTIX) which is heavily cash and Gov't bonds. It's at 5.55 today. The reason is that I'm expecting a little deflation (USDX is at 76.2) and for the equities markets to go down some (DOW is at 9775). The recent M3 money chart from shadowstats shows that while the overall M2 money supply is still going up, the velocity of money is sinking, making it harder for the average US consumer to get loans. The banks are taking a beating on bad loans and are still hoarding cash to cushion the blow of the bad loans, thus making available cash more valueable. I see gold and crude going down, or at best sideways, despite today's high in gold. I simply can't see how equities can rally from these levels without better fundamentals, although I must say that yesterday's manufacturing numbers were actually quite impressive.

Here's a link to an article on deflation:


Yesterday Ambrose Evans-Pritchard published an excellent article of the state of the Japanese economy that was truly scary. It describes a nation helplessly drifting into default, and most scary of all is that the credit default swap markets agree.. it's now three times as expensive to insure Japanese Gov't debt as it is to insure US Gov't debt. Unless something changes there, and soon, the Bond vigilantes will force a Depression-era cuts in basic services and social security, much like Ireland and Iceland has had to endure, only with less hope for the future as Japan is an aging society with fewer and fewer workers:


Also remember that Japan is the second largest holders of US bonds, and if they came to a serious crunch, would have to liquidate their US assets to prop up their finances back home by cashing in their short term US treasuries instead of rolling them over as most investors do. This has the potential to blow a nice hole in the port bow of the USS Uncle Sam should it occur. As far as I can see, this appears to be the most serious problem facing the world economy.. at the moment.

Disclaimer: This should not be construed as investment advice. Any investment involves the possibility of loss.

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