As I was floating down impassible rivers
I no longer felt myself steered by the haulers…
– Arthur Rimbaud, “The Drunken Boat”
The news yesterday pushed against us like a gentle wind. Pending house sales were bad. Consumer spending was good. Unemployment was bad. Manufacturing was good.
The Dow rose 47 points. It has moved without much conviction for several weeks. It can’t seem to make up its mind. We thought it had headed down decisively a few weeks ago…and then, it stabilized…and wandered about…
Gold has more sense of destiny about it. It’s been in a bull market for the last 10 years…and shows no sign of wanting to do anything else. It lost $11 yesterday, but still trades at $1,132…not that far from its all-time high.
Gold is in a real bull market. As near as we can tell it is still in the developing stages. There are a few old gold bugs around. But the public is not yet talking about gold. Investors are not yet adding major positions in gold to their portfolios. Ordinary people are not yet expecting gold to go to $5,000 or $10,000 an ounce.
But the news keeps coming…the opinions…the rants…the data…and the theories…
This way and that…we begin to feel like a “drunken boat.” That was the title to a poem written by a 17-year-old Frenchman named Arthur Rimbaud. It describes how we meander. We are driven by the winds…and pushed by the back-eddies… Turning our bow this way …and then that way…
Never quite sure what direction we’re going…or what to think… No one is in control…
And still, the current continues…and we keep heading downstream…carried by the great river…always moving along.
One day we’re fascinated by what is going on in Japan. The next day it’s China. Some days we think we might somehow muddle through…on others, we’re sure something is going to blow up any minute.
But that river just keeps rolling along…and we’re on it.
Where does it lead? Well, that’s the point. We’re not sure…
All we’re sure about is that it doesn’t lead where most people think. They think they see a ‘recovery.’ Forget it. Won’t happen. We could have another speculative period…but it won’t be like the Bubble Epoch of 2005-2007. Houses would have to go up 20% just to get homeowners’ heads above the water. Then, maybe they could borrow and spend like it was 2005 again…but that’s not going to happen. People don’t have the incomes…or the credit…to bid up house prices again.
Here’s a headline from The Wall Street Journal: “Employment of Adult Males at Record Low.”
Where does that lead? We’re not sure…but we don’t think it leads to ‘growth’ in the US economy. Instead, it leads to bankruptcy, deflation…and maybe insurrection.
And what about the Chinese economy? Isn’t that growing at breakneck speed – over 10% per year?
The trouble with breakneck speeds is that you do break your neck. China should slow down…or it’s going have an accident. And if it slows down, the whole world slows down with it…
And as to that ‘growth’ – it’s counterfeit anyway. It’s not real growth…it’s ersatz growth, caused by greater and greater government involvement and spending. The feds (the haulers) pretend to be in control. They want us to believe they are in control. But they are out of control themselves!
Can increasing government spending really make people more prosperous?
Show us an example!
for Markets and Money