Reinko

The Untold Story of U.S. Banks, and Other Market Observations

This article contains weird logic, quote:

Meanwhile, note the vicious decline in gold, as inflation themes have retreated to the back burner.

Inflation retreating to the back burner?????
As you see what is in the pipeline; producer price index, wholesale price index are all 10% or more year on year (and this for a whole lot of months now) it is hard to see inflation retreating.

For the gold retreat please read some of the other articles around gold prices on this website; massive short selling on the futures markets have driven down the spot price to such an extend that the normal relation between supply and demand has been destroyed.

Furthermore; what happens if you add up all the market cap of the banks in this sample? Rather likely it has declined in the last year... And not by a few percent!

Think Inflation in the U.S. Is Bad? Listen Up

Lots of countries with a currency peg to the US dollar face double digit inflation for some time now.
And even now lots of them would like to keep the peg in place while commen sense would be to peg it against a basket of currencies.

But if they are too stupid to understand elementary economical reasoning, let the inflation learn them elementary economics!

The peg was stupid in the first place...

Are We Facing a New Wave of Sovereign Bond Defaults?

The author asks himself the following question, quote:

Well, are levels of domestic debt rising? In real terms?

Unquote.

Comment: See this detail from the FED Z1 release, look in the first column and scroll down, link:

www.federalreserve.gov...

Lets look at non financial debt only:

2007 Q4:31249.3
2008 Q1:31758.4 billions of US$.

So in one quarter has this part of the US picked up over 500 billion more debt, for the year this will mean about 2000 billion or 2 trillion.

That is a size of about 15% of the yearly gross domestic product in more debt and this is only a segment of US society.

Conclusion: Debt growth is still a multiple of gross domestic product growth. The law of exponentials still says the biggest exponent wins and thus total debt will grow on and on...

As a comparison:
Suppose company 'Blink it Blue' has a market cap of 100 million and every 2 to 3 years they sell bonds in 100 million US$ bundels.
Would you invest in the long run in that company?

So Much for the Decoupling...

To Michael B. Krause:

Were the FED money auctions not desinged for keeping all kinds of spreads down? Well here in Europe long lasting libor still hangs high above the ECB stuff so it has not worked much (although libor in the USA is more down lately).

To Barry Ritholtz: You are a good writer man! My compliments...