|"It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going directly to Heaven, we were all going the other way."|
This market is a real puzzler.
On the one hand, the kinds of charts that folks like me, Serge, and the good folks from EWI have created are beautiful, logical, coherent, and stunningly symmetric. There is an artfulness to good charting, and – – when it works – – there is a real beauty to patterns repeating, cycles turning, and analogs matching. This is as God intended.
On the other hand, it's a cold, hard fact that Shalom has stated in terms that needn't be interpreted that he will print as many trillions of digi-bucks as are needed to stave off deflation. The bull market in precious metals doesn't matter; the crushing of the US dollar doesn't matter; the credit-worthiness of the U.S. doesn't matter. All that matters is to make damned sure interest rates stay near 0% and deflation doesn't have a chance.
The speculations offered in Prechter's book suggest deflation as inevitable, but I don't think it takes into account the fact that Shalom can create an infinite amount of digi-bucks. So no matter how much debt is out there, it can be nuked with one press of the Enter key on the right person's desk.
It's starting to get through my thick skull that aligning my positions with Benny Boy's insanity makes the most sense, which is why my TLT short – – my largest – – makes sense to me. As these trillions of digi-bucks start to sink into the economy, it seems to me that high interest rates and inflation are a foregone conclusion, which will torpedo bonds. Added to this, the U.S. debt – – which politicians are openly admitting has as much chance of being paid back as the $6,800,000,000 Kervial owes – is going to sink the country's credit-worthiness. So I think the notion of US debt being a great investment is ridiculous.
Now the risk here is that US bonds might represent a flight to quality, just in case the market ever falls again (which should happen around the time we've successfully colonized Mars). I'm not so sure. To me, the US debt market representing a high-grade place to keep your money safe is the equivalent of being told you have to enter sexual congress with the corpse of the late Strom Thurmond, in which case the alternate – Roseanne Barr – is the less-unattractive alternative. Yes, there may be a flight to quality, but there's "quality"………..and then there's Quality.
I presently have eight long positions – – two of them quite sizable - – and 80 shorts. I have, over the past weeks, lost my appetite for carrying a lot of small short positions, since this market seems principally interested in Going Up. So if they get stopped out, they get stopped out, and I let my quantity of positions diminish.
My main interest right now is the rise of the US dollar (which I think will be temporary, but somewhat meaningful) and the degradation of TLT.
And that's all I've got to say about that.