The subtitle in Peter Seller's movie "Dr. Strangelove" was "How I learned to love the Bomb." The Bomb of course was the atomic bomb. It was "the answer" to all our problems since "it saved us money" which to Peter Sellers was sheer lunacy. Great movie. Now we have the real bomb: inflation. Of course those who fight against this factual reality are succumbing theoretically to it as fast as the rest of us trying to pay with this weeks dwindling paychecks with the ever rising expenses. Why was the deflation theory destroyed last week then? Simply put because Ben Bernanke finally bowed to reality and said interest rates are going to rise. This annihilated the bond market last week. In other words the last leg of the "deflation theory" that existed--that since interest rates were at zero and were going to stay that way "forever" could "only mean we have deflation" has finally been pulled out from the stool. Now "you and I" have no idea how much inflation is out there because the government hasn't tried to combat it yet. The "tell" however is that "IT'S A LOT" since the mere mention that "forever" is now gone in the ZIRP caused the 30 year auction to, for all intents and purposes, fail. We've had a bad start to the equity markets this year with commodity and resource names dominating while techs and the banks have languished. Auctions are getting pulled in the IPO market. Pricing is getting ugly. This is in spite of spectacular earnings from corporate USA. Indeed not even "the negro" blames "the bankers" anymore. The country may still get a cyclical recovery as the democratic party finally "get's it" about "jobs." (as if it's ever been about anything else, right? in other words, the democrats are NEVER going to "get it.") But what the "411" is FOR INVESTORS going forward is the potential for a massive spike in food prices something the United States has never experienced "en toto" before. In other words "911." The rest of the world has dealt with food inflation which is why they're flocking to the dollar. Needless to say that's a mistake as well. It's hard not to see another blow up on Wall Street here since the entire financial sector is hooked on the bailout habit. Indeed with the "market low" reached on the very same day that mark to market accounting was rescinded just under one year ago one has to wonder what tricks Uncle Sam can have left now that Uncle Ben has run out of them. The answer as I think we all know is "more of the same." In other words "print and borrow, print and borrow." Isn't that all the Democrats who are in charge have ended up standing for anyways? Isn't that why there's such a hue and cry for "bipartisanship"? Republicans would be fools if they were to follow.
Disclosure: cash is still a traders best friend