Is it inflation with all the monies pumped into the economy, or is it deflation as economic growth goes south for a season.
Given the choice between the 2, govs of course prefer the inflation. Tax revenue, business models, retirement planning etc all hinge on being able to have a higher valuation down the road.
I think everyone is as confused. We see gold taking off the last few days like no tomorrow, yet on the other hand, we witness the lowest fed rates in history. Gold screaming inflation while fed funds screaming deflation. What is an investor to do?
Well, I think both scenarios are not good for equities. That should be a given. I supposed that deflation has not run the course yet. I would be on that side of the aisle until proven otherwise. But if after writing this I see inflation getting the upper hand, would it be wrong to switch opinions? Isn't that what trading is about?
As some one commented about 30 year bonds and a 30 year cycle, we are on the edge of yet another bubble. The treasury bubble. If inflation takes hold, these thing are certain to come tumbling down. Since I am not a good timer, I will sit on the sidelines of this show until I feel confident of the bubble popping. Then I expect to get in.
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3 comments:
Hi Dell,
Gold prices are linked to USD (which got hammered for the past week). As I see it, Gold is in a down trend and what we see right now is just an upside correction in the channel. Along that theory, USD should keep going up in it's uptrend toward 1.20 (Euro/USD).
On the other hand, just to prove there is an exception to the rule, Oil keeps falling even with the USD down as it is and with new output cuts.
I couldn't help it today and I had to go take a long put position on TLT. It just screams correction.
That TLT may end up being the best play.
I just wait (sometimes too long) to get confirmations.
TBT is now traded as an option which is the ultrashort for TLT.
Already some traders got on board with long calls. The call prices jumped today for certain strikes as the value of TBT was dropping. Somebody knws something. ;)
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