Tuesday, July 12, 2011

Was It Ever In Doubt?

The Federal Reserve released the minutes from their June 21-22 meeting today and market participants immediately reacted to one sentence, “A few members noted that, depending on how economic conditions evolve, the committee might have to consider providing additional monetary stimulus…” Ah, QE3 officially back on the table and this time the market only had to fall 7%. But was it ever in doubt? With the Federal Reserve so focused on deflation, I don’t think so.

“Never in Doubt” seems to be a theme inside Washington these days. We know the debt ceiling agreement will be reached before the August deadline. The disastrous consequences are known by both sides and that means the situation will be resolved. The ten year yield is still only 2.91% which either makes bond investors the stupidest people on the earth or they are just enjoying the theatre in Washington for what it is – theatre.

But are there situations we should doubt at all in this world? Greece will default so they should just do it. Gold is going to $2000 per ounce, at the very least, with the current fiat currency problems. U.S. Treasury bonds are the worst investment over the next 10 years. Emerging Markets are the best investment over the next 10 years. It all seems so easy.