Where is the money going?

Where is the money going?
Usually when equities devalue the money has to go somewhere and that somewhere is usually into commodities. These days there is so much fear that money is mainly going into bonds to make just a few % a year. That is a sign of severe fear worldwide. No one is willing to put their dollars or euros or pounds or rupees or yen on the line to make more than 2% per annum.

 

So what is going to stop the fear? Well banks need to gain confidence in one another. Soon enough that confidence shall be bolstered by the Fed as the grand printing press takes a stake in banks themselves. This move will spike confidence instantly; and when confidence spikes, equities spike. We’re going to see bond yields go up as bond prices fall on the avalanche of money into equities and commodities. Since the dollar is set to lose value during that time we’ll see oil spike back to 100+ unfortunately but I’ll go one further and say it won’t go to all times highs again. Oil should stay around 100 and allow equities to gain back their losses in the next year. Oil exporters from OPEC think prices should be higher and they are willing to impose artificial limits of supply to pad their bottom line. Their foolishness and greed are always their demise. When they were convinced to move from dollars to gold in 1980 to avoid losing money on a falling dollar; they lost 80% of their wealth with only their greed and ignorance to thank. Again they have made a foolish, greedy trade into long oil and now are losing their preverbal asses for the second time in less than 30 years.

 

I think the next couple decades will be plagued with frequent downturns like a hangover from massive borrowing and spending never before seen in recorded history. Looking to gold’s future seems bleak or at best range bound. Surely as the dollar devalues again gold will be the winner, but consider that simultaneously fear will leave the market place in record pace just as it entered in record pace. My outlook for gold is unchanged this year; lackluster for the lustrous metal.

 

On the whole we have to consider the behemoth in the East that will demand food and energy at record paces as soon as its shackles are unbound. It will grow at the fastest pace allowed regardless of environmental damage devouring natural resources and exploiting cheap labor to build things that inspire their brethren to continue cheap labor socialistic values. Great things will be built no doubt but it’s just a matter of time before the corruption leads to its demise. Capitalism has been chastised in recent months due to the greed of a few and the expense of billions. These periods are constructed by fiat money and central bankers, but if we look to the alternative in socialism we clearly see a much worse option. History will repeat as it most definitely does and our recession will look like a walk in the park on a sunny Sunday afternoon as the red giant in the East devours itself and spews corruption from its borders. Weaponry will become cheap and accessible again to the radically misled fools and defense spending will be increased in response to the multi faceted threat. No doubt an increase in defense spending will precede the fall of the East as rhetoric of superiority and antagonization will pre-empt its demise. One might consider the US is well positioned to weather the rise and fall of the East with little drawdown.