There Are No Free Markets Anymore

There are no markets anymore, just interventions - Chris Powell, GATA

I cannot phrase the current state of the global markets any more succinctly than Chris Powell did in the title of his fantastic article for GATA.org.

First, let's consider this Bloomberg report that the US, Europe, and Japan devised a plan to prop up the dollar in mid-March - with the fruits of their labor resulting in this massive dollar rally.

Also, an article by Vincent Bressler at GoldSeek.com. I'd highly recommend a read - here's a brief excerpt:

For the last month the US Treasury, in conjunction with the CTFC, SEC, Goldman Sachs and others have conspired to annihilate gold and silver on the futures exchanges of the world in conjunction with massive intervention to prop up the US Dollar vs other currencies.

Let's you and I, dear reader, review the Federal Government's ailments entering this summer:

1. Prop up the stock prices of the financials. With equity prices depressed, the financials would be sunk, as they wouldn't be able to raise more capital without severely diluting their existing shareholder base. FED RX: SQUEEZE THE FINANCIAL SHORTS
2. Prop up the dollar. FED RX: COORDINATED INTERVENTION WITH OTHER CENTRAL BANKS.
3. Control the prices of gold and silver. The dollar cannot be viewed as a "safe haven" if gold and silver are doing moonshots. FED RX: DRIVE THE PRICES OF GOLD AND SILVER DOWN SO SHARPLY, THAT ALL LEVERAGED TRADERS ARE FORCED OUT.

#1 - Check...#2 - Check...and #3 - Check, plus extra credit for all of the leveraged traders that have been busted

Ha - I'm still standing you bastards! :)

So the million dollar question (priced in gold, of course) is...how can we "invest" in markets that are being manipulated in such a grave fashion? Especially when we're opposing the House!

Should us commodity nuts just give it up, and start buying shares of Apple and Google?

Call me an old school, free market, libertarian kind of guy - but even in this hour, a very dark hour for free markets - I don't think, for one second, that these bastards are going to be able to manipulate these markets over the long term. And I plan to trade accordingly, and make all the money I can, while I'm still allowed to do so.

Donald Coxe: Cautious About Equities, Believes Interventions are Inflationary

Legendary investor Donald Coxe is one I follow closely. I would highly recommend his latest conference call where he discusses the global economic environment, and comments on potential ramifications of the government's Freddie/Fannie interventions.

He also has a fantastic Canadian accent that really adds to the fun.

My notes from the call:

• Financial system is still under stress and undercapitalized
• Remains cautious about overall equity exposure
• Believes the gov't interventions are highly inflationary
• Cautions against confusing deflation with falling asset prices (believes Japan's deflationary recession was an exception to the norm)
  
• Bullish on commodities...provided we do not have a deep global recession

Also check out this summary of Donald Coxe's thoughts.

Jim Rogers Video: Fannie/Freddie Bailout is Socialism for the Rich

The End of the Dollar (Fool's) Rally?

Could very well be - I'm not taking any chances. I just closed out my two British pound short positions - I don't want to stand in the way of a "gap up".

I can't figure out why this is triggering such a reaction - what exactly was the market expecting regarding Freddie and Fannie? Didn't they see the Fannie spoof on YouTube?

Inflation vs. Deflation: The Battle Rages On

The battle between inflation and deflation continues to rage on, with deflation mounting a very impressive counterattack. Check out this chart of last Thursday's single day sector returns, courtesy of Agora:

It's challenging, to say the least, to make money investing when EVERYTHING in EVERY market is going down. This is the classic deflationary nightmare that triggers harrowing thoughts of the Great Depression, and prompted Ben Bernanke to once quip that the United States had a magical invention called the printing press that could stem any deflationary tide.

Please consider, though, that recessions (and depressions) are not inherently deflationary. Germany's pre-WWII depression comes to mind as an inflationary mess that ultimately led to the rise of Adolph Hitler.

The playbooks for inflationary and deflationary environments are quite different. In an inflationary environment, you want to avoid many stocks and almost all bonds, in favor of gold, silver, and other tangible commodities. In a deflationary environment, the argument goes that everything goes down in price, so you should just hold cash.

The inflation/deflation battle is one we'll continue to track closely here. While I do believe the government will print its way out of any potential deflationary scenario, thus giving inflation the nod, the deflation argument is certainly a valid one.

Which contender are you putting YOUR money on? Inflation...or deflation?