Friday, February 24, 2012

The Weekly Update 2-24-2012

"Ring Around The Rosy"
By Mother Goose

Ring around the rosy,
Pocket full of posy,
Ashes! Ashes!
We all fall down!

The Rosy of the equity markets since October 2011 has been the Reserve Banks of the world.  Our own Federal Reserve has continued to keep interest rates artificially low via "Operation Twist".  When combined with Quantitative Easing #1 & #2 these actions place close to $3 Trillion dollars of liquidity in to the monetary system.

With the most recent bailout for Greece other currencies have been printed and forced in to the monetary system around the world by:

The Federal Reserve: via the International Monetary Fund (IMF)
The Bank of Japan
The Peoples Bank of China
The European Central Bank
The Bank of England

The European Central bank injected the equivalent of $645 BILLION dollars and The Bank of England $125 BILLION.  Now those numbers will start a pretty darn good party!!

 Now let the banking system leverage it 20-50X, or more, invest the total in "risk" assets like world equity markets, commodities, bonds, etc. and the party goes from pretty darn good to very very fine, in a hurry!!

As I have written for the last several months, I think this will end in tears.  However, until that point....week's, months or years...we will Ring around the rosy, Pocket full of posy.  Ultimately and if explained logically, each person older than age ten, understands you don't solve a world debt problem issuing more debt!!  That will just create ASHES!!  ASHES!!  We all fall down!

Until the point that our Target Violation Exit Strategy tells us to step aside we will join in.  But as written in last week's post, without the concentration of any one investment that rhymes with apple.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

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