Economy

Note:  I am thinking this may be a good post for the front of the site, but am looking for your feedback here in the enrolled area before ‘going live’ with it.  Can you spot any weaknesses in it?  Have I made my case?  Is anything unclear? 

As we watch the market gyrate wildly back and forth seeking direction, it seems that hedge funds, the hired guns of the Wild West, are finding the action too exciting for their taste.

When hedge funds are backing slowly away from the table, mumbling about needing to go do something somewhere else for awhile, it means that the situation has become unpredictable and potentially dangerous.

In consideration for my talk at Yahoo! headquarters in Sunnyvale, CA a while back, an article I wrote will go on the front page on Tuesday of next week, the peak Web traffic day. 

Like the Financial World article, my goal here is to gently introduce the main concepts of this site to a wider audience.  Again, I am not trying to run all 100 yards on the first play. 

Here’s a sneak peek at it for enrolled members:

Quite often, the start of a quarter is a strong moment for stocks, presumably due to all of the pension and 401k money that flows in as a function of the calendar date.

This one seems to be starting out very weak, which seems just a bit more ominous.  With all the recent weakness, you might think we’d be due for a bounce here.

Not so much.

No, the “QE II” I am referring to is not an ocean liner, but the next putative round of thin-air money printing that will be known as Quantitative Easing II.

I see plenty of signs that might lead a deflation-fearing Central Bank Chairman to begin making plans.

Here are a few of the things that are certainly causing a good degree of worry down at Bernanke Central in the Eccles building.  The Fed, and Bernanke in particular, are avowed ‘deflation fighters’ who are constantly keeping their eyes peeled for anything that might hint at deflationary forces.

It’s important to have a mental filter in place when reading news articles, especially when they seek to explain financial movements.

For example, check out this little ditty in Bloomberg today:

June 18 (Bloomberg) — Gold futures rose to a record $1,263.70 an ounce in New York as Europe’s fiscal woes and dimming prospects for the U.S. economy prompted investors to step up purchases of bullion as an alternative asset.

Well, here we might note that world stock markets are up today for the ninth day in a row and the US stock market is up 4.5% over the past two weeks. Those data points do not jibe well with the concept of “dimming prospects” for the economy.  Plus it’s kind of hard to make the case that a rise in gold should correlate with dimming economic prospects.  One might actually make a better case for the opposite effect.

Instead, I think there’s probably some other reason for gold surging today.  Here are a few other candidates: