It is always easy to say after the fact gosh that was a bubble or clearly things were out of control.  Most people will either ignore the warnings, ride the good times and then never adjust when the music stops.  That was myself in 1999 thru 2001.  Other people will sit it all out, vying for safety while missing some fantastic (if lacking any root in sense) upside; over the long run they will be correct (and be called uber bears) and generally preserve more of their capital then the bubble riders because they never believe in the myth.  But they will be mocked along the way, and be compared to a turtle while the hares.  Unfortunately the downside of bubbles tends to exterminate many hares. 

Those are the 2 extremes; if one can find some happy middle she will be able to ride at least part of the bubble(s) that used to happen a few times a century but thanks to our central bankers now happen on 3-6 year cycles.  Yet they can remain aware this is all a game of chicken, and jump off the railroad car before it fully falls off the tracks - certainly taking some blunt force damage but nothing mortal.  And that is where we are now; countless traders recognizing that Ben Bernanke has given them a license to steal and knowing much of what is happening now, and to some unknown point in the future, is largely a mirage of paper printing.  But each remains confidant they won't be the last sucker standing i.e. the one without a chair when the music stops.  Of course there is a bell curve, and with limited seating only a portion of those confidant folk will actually find a suitable place to sit.

That sets the stage for 2 videos from CNBC yesterday.  As with oil in 2008, we see a genuine thesis will be taken to extreme by the hot money.  In the crude oil space the correct thesis was Chindia will bring online X consumers, and demand for crude will increase - therefore prices go up.  That explained a good portion of the move in 2006, 2007 - perhaps explaining the move to $70, $80.  But then hot money flooded in and the parabolic stage was reached in 2008; when crude peaked near $150.  It was not Chindians behind that part of the move - that was Hedgians and Goldman Sachians.  And so we will see the exact parallel in the dollar is awful, precious metals are the only thing.  It is based on reality - a government and central bank who treats paper money as if its toilet paper.  That will explain part of the move... but the Hedgians and Goldman Sachians will push this to some extreme that makes no sense.  If it's here and now or in 4 months or 4 quarters or 4 years?  Unknowable.  But human behavior never changes.

Could I interest you in a tulip per chance?

******************************************

Video #1: Commodities pundit Dennis Gartman says gold, which he was confused by 2 months ago [Sep 4, 2009: Dennis Gartman Scratching Head on Gold] is in a bubble but as with all of our breed, we're in it until the music stops.  And we swear that none of us will be the one to be drawn in by the sirens when a correction turns into a flood of lemmings all trying to exit the same door at once.

  • While not being comfortable with the current gold trade, Dennis Gartman, founder of The Gartman Letter, told CNBC Monday that the price of the precious metal will continue to go up until it stops.
  • It is a gold bubble, Gartman told CNBC. He called the trade on gold mind boggling, but also said he is currently long — or betting gold will go higher.  Gold's Friday low of $1,102 an ounce is the floor, according to Gartman. If it falls below that mark, he suggests investors should head to the sidelines.
  • The trend for the dollar is still down and will continue, Gartman said. It's an unbelievably crowded trade, he added.
  • As for where he'd park cash for good returns, Gartman tipped Canadian and Australian currencies.  If you're going to be any place, be there, Gartman said.
  • As for stocks, it will take bad economic data or political circumstance to knock them off their rally, Gartman said.  When asked what is driving stocks' upward movement, Gartman answered: Liquidity

(Email readers will need to come to website to view video - 2 minutes)


Gold (GLD)

[Aug 21, 2009: Dennis Gartman Launches River Crescent Hedge Fund]

[Jun 17, 2009: Dennis Gartman Speech - Making It Through the Meltdown]

[Jun 8, 2009: Dennis Gartman Short Term Bearish on Oil]

Video #2:  There was some hubbub late yesterday when Meredith Whitney, bank analyst to the stars, said she had not been more bearish in a year.  She could not understand the rally.  It was not rooted in fundamentals.  It is all just very confusing.  Sounds like she could write a great blog.  Remember Meredith - you don't need to believe, you only need to partake... and make sure you jump off at the appropriate time. That's how it works in a bubble economy covered in the honey of a bubble market, as offered to us by our bubble policies.  We love living in a mirage so we shall continue to do so; because leaving the Matrix is such an ugly place. 

  • I haven't been this bearish in a year, she said in a live interview. I look at the board and every single stock from Tiffany (TIF), Bank of America (BAC), and Caterpillar (CAT) is up. But there is no fundamental rooting as to why these names are up—particularly in the consumer space.
  • There's also been a real contraction in consumer credit. Whitney hasn't seen this much consumer credit contraction, ever. Whitney said in 1990, '91, yes, you had the market provide so am liquidity to the consumers, the consumer had more liquidity during that time. Now the consumer has actually a lot less liquidity. $1.5 trillion of credit lines on credit cards have been pulled from the system and that credit contraction is reaccelerating.
  • Whitney said folks that are hoping for a robust consumer market, (consumer Christmas) are going to be disappointed. There's nowhere to hide at this point.
  • Whitney said there is no way the banking sector is well capitalized and it is time to reduce weighting in large-cap banks. Whitney also said she sees a double-dip U.S. recession.
  • I don't know what's going on in the market right now because it makes no sense to me, she said.

 (Email readers will need to come to website to view video - 11 minutes) 


[Mar 18, 2009: CNBC - Meredith Whitney's Latest Views]

[Jan 30, 2009: Meredith Whitney Joins Roubini & Soros in Smothering the Kool Aid]

[Sep 23, 2008: Meredith Whitney and I Continue to Agree, Bailout or No Bailout]

[Aug 4, 2008: Meredith Whitney Continues to be Negative on Financials (and Housing)]

[Mar 26, 2008: I'm on Meredith Whitney's Side

//