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Philly, Pa
Legendary Market Wizard
Experience: Master
Platform: NinjaTrader
Trading: ES, ZB
Posts: 6,482 since Jul 2010
Thanks Given: 6,662
Thanks Received: 36,258
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Long as I remember The rain been coming down.
Clouds of myst'ry pouring Confusion on the ground.
Good men through the ages, Trying to find the sun;
And I wonder, Still I wonder, Who'll stop the rain.
I went down Virginia, Seeking shelter from the storm.
Caught up in the fable, I watched the tower grow.
Five year plans and new deals, Wrapped in golden chains.
And I wonder, Still I wonder Who'll stop the rain.
Heard the singers playing, How we cheered for more.
The crowd had rushed together, Trying to keep warm.
Still the rain kept pouring, Falling on my ears.
And I wonder, Still I wonder Who'll stop the rain.
The quality shared by all classics, is that they endure the test of time. Written by John Fogerty in 1970, this rock classic is as relevant today as it was 40 years ago. American soldiers were dying daily, only back then it was in Southeast Asia, instead of Iraq and Afghanistan. And akin to current times, economic growth was slowing, inflation was rising, and the dollar was in poor shape. Gold went on to make record highs along with the price of crude oil, and the decade culminated in a double-digit blow off in inflation.
Fogerty’s populist cries and warnings were echoed by many in the 60’s and are repeated by many today. Charles Biderman recently stated, "Retail investors are not coming back to the US. Those investors that are investing are buying global equities and are buying commodities.”, and the even more unpleasant summation: "individuals have been selling, companies are net selling, insider selling and new offerings are swamping any buyback and any cash M&A activity since QE 2 was announced. Pension funds and hedge funds don't really have that much cash to invest.” He goes on to ask, “if the only buyer is the Fed, and the Fed stops buying, what is going to happen?” I ask, “ what happens if they don’t stop, and they follow up with QE3 and QE4?
Bernanke and Obama try to say all the right things and nod their heads in all the right places, but I would imagine that John Fogerty isn’t distracted by what they are saying, or fooled by the current rally in equities. He probably realizes that Bernanke, Obama, and the Fed are essentially doubling down with the enactment of QE2, risking our money and our children's futures, and feels as as helpless today as he did back then. Nasim Taleb describes it as, “they are selling a deep out-of- the -money option on hyper-inflation, assuming that there is no risk.”.
PIMCO would like us to believe that we are living in a “New Normal”, where distributions are fatter and flatter, but it all seems strikingly familiar to me. I find it hard to believe that much has changed, but what I am left wondering is... Where are we on the curve?
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