Thursday, October 14, 2010

Wishing We Were Japanese

Just before the two lost decades that is now Japan, I read once where commercial real estate was selling at one million per square inch. I am not sure whether that was in dollars or yen and I am too lazy to look it up. The point is illustrative.

That kind of insanity kicked off Japan's banking melt down and it's two lost decades.

Anything Japan can do, America can do better. Including credit disasters. We extended make believe money to everyone. That the "FED" has mirrored Japan's moves- in the post meltdown period is not news. There is simply no alternative for "one-way" Ben Bernanke.

So when they posted today's usual round of bad news, widening trade gap, PPI at 0.4, and unemployment up again...I was not surprised. I was not surprised to see stock futures up.

The stock market has been marginalized to the extent that it is simply no longer a credible predictor of our nation's economic health. All it has become is a place for bankers to trade stocks with cheap money. The real indicator of our nation's health is the counter indicator- gold.

In the old days- when the market functioned as a true barometer of our nation's fiscal health- gold and equities did not move in tandem. We are witnessing the strange effects of central bankers trying desperately to repair themselves. Sooner or later, equities and gold are going to de-couple and diverge. I think it will be breathtaking when it happens. Commodities are absolutely red-lined now and as they move even higher, the chance of divergence grows dramatically.

I am reminded of an old cliche' here, "Every problem looks like a nail- to a hammer." One way Ben Bernanke just can't see the solution. His very survival depends on his ignoring the solution.
That solution is what separates men from boys. Heroes from survivors. He will just keep hammering away- trying to inflate us out of the mess his own central bank caused.

Before this over, I think there is a very good chance that we are going to gaze fondly upon the Japanese.

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