Financial Sense Blog

We discuss implications of cultural and structural differences between the U.S. and the rest of the world in how the evolving credit crisis is addressed. The U.S. approach may come at a cost to the U.S. dollar.

Hyperinflation is probably unavoidable according to Deepcaster and other Notable Newsletter Writers. But Hyperinflation carries with it both Threats and Opportunities.

Mr. Treece discusses the threat posed to investor portfolios by fixed income securities, as well as a possible theory for how the US government may address mounting debt.

In short, I think the market is on the verge of another rally which is very exciting since we cashed out in late April before the market had the big sell off. It will be nice to put some long term plays to work so we are not so dependent on the short intraday plays which last 1-2 days because of the extreme volatility in the market.

The Sun Causes Global Warming and Cooling …Climate Change!!

Unlike the Australian Dollar, gold pays less interest than even the US Dollar or Japanese Yen... IF GROWING INFLATION is our future, then a likely-looking bolt-hole for retained capital must be the Australian Dollar.

Europe is not “all better” by a long shot and the net result will be more turmoil and attraction to gold as a safe haven investment. Volatility is the other most important trend this year as we ebb and flow between risk aversion and risk appetite. Each new “revelation” about German and French bank US$958B, or total European bank US$1.6T exposure to the PIGS of Europe will bring on the volatility. UK has exposed themselves to US$370B in loans to just Spain and Ireland.

The markets have clearly put in a short-term bottom after the April to June correction. Whether this short-term bottom will turn into a more pronounced intermediate bottom that leads to a multi-week to multi-month rally is too soon to tell. That said, what the markets have going against them this time around that they did not have to contend with in 2009 is a decline in the leading economic indicators (LEIs) that are forecasting lower economic growth ahead, something the market is likely discounting now.

A Treasury Department report to Congress last week stated that total U.S. debt will climb to $19.6 trillion by 2015, as opposed to the 2019 date previously estimated. Treasury also estimated that total U.S. debt will top 13.6 trillion this year and would rise to 102% of GDP by 2015 as well. And most astonishingly, the report projected that the publicly traded debt (debt excluding intragovernmental obligations) would rise to $14 trillion by 2015, up from last year’s debt of “just” $7.5 trillion.