if deflation is coming, sell your gold, page-7

I disagree Grov. These are not my words, but I take the same side.

This is from the Week In Review from Bill Cara's blog billcara.com


'An associate who is not at all in the market sent me the following link related to Nouriel Roubini. http://tinyurl.com/d5bdvr I mean really; that guy is getting more TV time this month than President Obama. Financial Entertainment TV ought to be ashamed. The people want to hear the President.

I responded by advising my friend that macro-economics and equity markets are not highly correlated, and that in the Great Depression, following the market crash, from June 1, 1932 through Nov 9, 1938, there were four Bull phases averaging +98.6% each and the Dow 30 index soared from 4.40 to 13.79, and the following year there was another up-move of +29.8% between April 8 and Oct 25, 1939.

So, while we all respect Roubini for being one of many of us who sounded the alarm early -- he didn’t do anything that Rithholtz or I did for instance – I now tune him out. Americans understand the economic situation, and are now looking forward.

I could say that I suppose Roubini is looking forward to the consulting fees and book publisher advances he picked up in Davos. But, I’ll keep this positive because the glass is half full, as I see it.

Besides, while the S&P 500 index plunged -8.6% this month, my accounts were up: the Controlled Risk accounts grew +1.2% and the Growth accounts grew +2.9%. We averaged about 70% cash, and never use leverage.

We also don’t have time to read Roubini. We know that markets discount the future, and once the President’s A-Team is able to clean up the Humungous Bank & Broker (HB&B) Credit Default Swap (CDS) debacle, banks will trust one another, lending will recommence, and the American economic engine will get cranked up again.

It’s just a matter of time.

What will fuel that engine will be the trillions of cash held presently by the private sector, the trillions of cash that will be switched out of bonds that pay a pathetic yield, and the trillions of cash that will be injected by governments around the world to stem the economic crisis that started with the Lehman Brothers collapse when the US monetary authorities refused to take the hit for the CDS problems caused by Citigroup, Bank of America and JP Morgan.

Trillions upon trillions. Economic history, including the Great Depression, will never have recorded such a massive assault on the ills of the financial system as the world is about to encounter. Moreover, there will be new banking and securities laws and regulations enacted –not only in America, but everywhere -- to provide the checks and balances needed to prevent bankers from ever screwing the people like they have in the past ten years.'