10/14/10 Buenos Aires, Argentina – Today, we’re headed up to the ranch… Which means we’re going to take a few days off from these daily reckonings.
Instead of reckoning with gold, fed policy, stocks and interest rates…we’re going to reckon with things that are easier to understand but harder to actually do anything about. Cattle. Water. Grapes. Capers.
Capers? Yes, apparently, the high, dry valleys are good for growing capers.
“Why bother,” asked a friend in Paris. “Aren’t you supposed to be enjoying that place? You don’t want to work when you go there.”
Au contraire. We like working. Especially on things we know nothing about.
Truth is, we barely knew what capers were. Those little salty things that they put in with fish, olives, pickles. We don’t really know what they do with them. But we’re going to plant some anyway to see how they do…
It helps keep the people up there busy. Otherwise, they have no jobs. We feel the heavy weight of a landowner’s responsibility…to make the farm more than just a place to relax. We have to try to make it pay!
Meanwhile, stocks, commodities, practically everything is slobbering…breathing hard…hot and bothered. Probably capers too. Why? Because everything points to more easy money from the Fed. And everyone knows what easy money does. It causes prices to bubble up. Asset prices, that is. It doesn’t do much for the economy – not when the economy is de-leveraging. But it can really cause havoc in the financial markets.
The Dow went up another 75 points yesterday. Oil is up to $83. Gold is headed to $1,400 – and after that, the moon.
Whee! What fun it is to think about all that new, Fed-created money bubbling into the markets…pushing up everything in its path…
Ben Bernanke gave the Japanese some advice about 10 years ago. He said that if their economy was stuck in the doldrums it was their own damned fault. He didn’t put it that way. He said their problems were largely “self-induced.” Which is a polite way of saying it was their owned damned fault.
He made it clear that he wouldn’t let that happen to him. He’d use the tools at his disposal to light a fire under the economy. Anyway, that’s what he told them.
And now, here he is. In Tokyo. Well, not literally in Tokyo. You know what we mean. He’s faced with almost the same set of problems that faced the Japanese – a sluggish, de-leveraging, funky kind of economy.
“Across the US, long recovery looks like recession,” says The New York Times.
So far, Bernanke has done about the same things they Japanese did. And so far, he’s gotten about the same results.
But investors are betting that he won’t stop there. They’re betting that they can take him at his word…that he’ll pull the trigger on enough quantitative easing to light up the whole world. Or blow it up.
Yes, the markets seem to be jumping for joy at the prospect. Ben Bernanke is supposed to announce a program of easy money…not just a little easy money…but a lot of it. Analysts are talking about the Fed buying between $100 billion and $1.5 trillion in bonds.
Of course, investors have probably already priced that kind of QE into the price structure. So, what are they gonna do if Bernanke does the expected thing?
Ben Bernanke’s momma didn’t raise no moron. He knows the whole world is watching. If his gesture falls short of what investors expect, they’ll sell. And if he doesn’t do something dramatic, they’ll accuse him of being a coward…and they’ll sell too. Only if he surpasses their expectations will asset prices really take off. And, of course, the dollar will fall. Which is what he’s hoping for.
It will be a disaster for the economy. Printing press money always is. But it should be fun to watch.
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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Then, brave Americans might want to buy some Canadian stocks. They will rise in value as the Canadian dollar rises agains the U.S.
Don’t buy Canadian oil companies, those rise and fall with oil prices in U.S. dollars.
Buy some canadian companies that have both their expenses and revenues mostly in Candadian dollars.
Those are a little hard to find since most Canadian companies are big importers or exporters.
Tim Hortons the famous Canadian coffee chain that trades on New York as well as Toronto is an example (has only small U.S. exposure)
There are some regional banks here with no U.S. exposure.
Some telecom companies here in Canada that trade on New York as well.
Alternatively Americans can borrow in U.S. funds and open a Canadian dollar account.
In theory Americans can buy currency futures, but that sort of thing is restricted to sophisticated investors and is usually highly leveraged and can be financial suicide.
Satisfaction, right away, that is what QE does. But it’s cocaine for the system – what hangover we gonna get?
My advice stays the same: buy some land, grow your own food, and don’t forget about security.
That may be even better than gold.
So again are we going to let the Rat get away with it? Of course we are. We are going to stand and take like men & women. Very, very stupid men and women.
I have to admit, I don’t know WHAt to do and I’m fairly freaked out by it.
I have enough in gold and silver that I don’t feel comfortable extending the % of my wealth there – especially at these prices.
Stocks? It’s painful to sit out buying them when you see them going up – when you KNOW they are going to go up – because that still voice inside that I try to listen to warns, “This will at some point turn suddenly and end badly”.
Commoddities? If you have alot in gold then you have your commodity play already.
Currencies? In a cuurency war, you would only see a NOMINAL increase in the foreign currency vs the dollar. In truth, in such a war, they will all lose buying power.
Real Estate? What if there’s deflation after the inflation? What about the enormous glut of properties yet to be dumped on the market. Who will pay for a home if unemployment skyrockets?
emerging Markets? The advise to buy these seems wise until I notice that EM’s are correlated to our own stock market – they’re just more volatile. When ours goes up, theirs goes up more, but when ours gapped down, emerging markets got killed.
Other than buying stored food, a rifle and a buogout bag etc which requires a small % of wealth, I don’t know what the hell to do.
Gasparus, do what I do…….learn to make wine. It will give you something to do and the results will impress your friends. Fill your wine cellar with your toil, it’s another commodity play, but one of the best ones.