Economy

I use three approaches to shape my world view and then combine them to get a much clearer picture of what likely lies ahead. My goal today is to share with you how I come up with a view of the Big Picture and to share my outlook for 2013. Words: 873

The six charts I provide in this article illustrate why the hyperinflationary pressure in America is growing. This is not necessarily a forecast for hyperinflation - this is simply a demonstration that some of the precursors to a hyperinflationary cliff are building. (Words: 1001; Charts: 7)

While Treasuries are said to have no default risk as the Federal Reserve can always print money to pay off the debt, hidden risks might be lurking. As oxymoronic as it may sound, the biggest risk to the economy and the U.S. dollar might be, well, economic growth! Let us explain. Words: 2065; Charts: 1

The U.S. Dollar Index took a breather on Thursday on its apparent way down and through its support line of 79.00 closing the day at 79.26 vs. 79.27 on Wednesday well below its 50 day moving average of 80.16.

Barron's have just come out with the forecasts of 10 top analysts and ALL their forecasts are positive. There is not a single forecaster who expects the S&P 500 to fall in 2013 and there is only one forecaster who expects the 10 year bond yield to fall from its current level of 1.7% and he only sees a 10 bps decline to 1.6%. [Look at the average forecasts for each item at the end of the post.]

One couldn't imagine any better Christmas gift for hard assets and stocks than Ben Bernanke's surprise introduction of QE4 right on the heels of QE3. Call the duo QE7. "QE7" promises to expand the monetary base far faster than the markets had been discounting [which is great for gold] and also raises the floor under stocks. I suspect we'll close 2012 with a run at the highs, and possibly climb just short of 1,600 on the S&P 500 sometime in Q1. As for Treasury bonds, well, could this spell the end of the bond market? [Let's look at the ramifications of QE4 more closely.] Words: 516

[The just announced] QE4 will see the Fed buying $85B per month in U.S. Tbonds and Fanny/Freddie bonds with newly printed dollars - essentially debasing the dollar by 1 $trillion per year. The cold reality, however, is that each time QE is launched we get less wealth-effect bang for the buck and more inflation and, IMO, by the time it's switched off in mid-2014, we will have a real-world inflation rate of 5%+. (Words: 863; Charts: 2)

As Ayn Rand said “We can ignore reality, but we cannot ignore the consequences of ignoring reality” so, with apologies to Ayn Rand, let’s explore some examples of ignoring reality. (Words: 1132; Charts: 1)

We are on the precipice of enormous financial and economic change. It is not change for the good, especially for the United States. Excesses and mis-allocated resources of several generations are about to be exposed as modern industrial nations sink deeper into the economic hole they have dug for themselves. The purging of these economic mistakes will be painful, could create new wars as politicians attempt to deflect blame and may end up changing the political form of government in some countries. (Words: 364; Charts: 1)

We are in for a tough time for the next four years if the chart below, showing a big dive in economic development expectations, is any indication - ahd here is probably why that is the case. (Words: 200; Chart: 1)