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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Best of Richard Russell
May 3, 2011
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At the end of June, the Fed has let it be known that their second printing session, known as QE2 will end. Over recent months, the US economy has been on "life support" through the Fed buying one hundred billion dollars worth of Treasury bonds every month. Treasury bonds represent the debt of the US; thus the process of the Fed buying Treasury bonds is known as "monetizing the debt" or quantitative easing. QE2 loads the banks with cash. Quantitative easing is really a quaint and euphemistic phrase that means "printing money" for the banks.

The critical question facing the market and the nation now is -- what will happen when the Fed halts its monetizing machinations at the end of June? Some believe that the Fed will (out of fear) immediately move into QE3. My own guess is that after June 30, the Fed will wait a bit, just to see how the markets are reacting to the end of quantitative easing.

Quantitative easing means that more dollars are being created via monetizing the debt. The more dollar being created, the weaker the dollar. So what will happen when the Fed ceases (at least temporarily) to create additional dollars? One contrary theory is that the dollar could (surprisingly) strengthen.

Currently, the "smart" and sophisticated thing to do is to be short the dollar or be in a currency other than the dollar (including the precious metals). The prevailing wisdom is that you should be short the US dollar. It's the obvious conventional wisdom "smart" play.

And I wonder, is the market set up to cross up the dollar bears? If the Fed halts its dollar printing activities, we might see a sudden dollar rally. A rally that would catch the dollar shorts by surprise.

In that case, if the dollar were to rally, we'd probably see pressure on the precious metals. What then? My thinking is that gold and silver might correct temporarily. This would be the correction that would "knock out" all the Johnny-come-latelies and the belated in-and-out traders. It would also be a gut-check for all the so-called gold-bugs. Once the correction was over, I believe gold and silver would be ready for their final.

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