Firstly, Happy Monday.
Over the past week I’ve been reading and hearing a lot of material on this Quantitative Easing by Bernanke etc. How his talk was interpreted was a mess so the Fed’s president spoke to clarify things on how QE would be approached, blah blah blah. And more about how Bernanke was trying to take some of the juice out of the Equity market so it wouldn’t take off without the economy.
Now, 2-3 weeks later, many see exactly what many feared. With the Fed acting the way it is with it’s policies, analysts have found a trend in the last few bubbles. The attached picture explains it perfectly. Whenever the Fed has kept its rates lower than the Nominal GDP, there’s been a bubble. And yes, that is exactly the position we are in now.
Many now fear that this bubble whether seen or unseen will either happen now because it has been noticed, thus putting investor confidence in the toilet or will be triggered in a more financial fashion, rather than the Red Scare. However, it’s very interesting. Would now be a great time to buy gold? Markets have been somewhat bullish, the fear of a bubble is setting in unless the Fed changes something, and gold is at record lows.So? Buy gold? I mean, if I could, I would, at least a sufficient amount to maybe collateralize what I have invested in equities? Or go all in and become a millionaire if things go my way. But then again isnt that the whole game?
Who knows, just some food for thought. Enjoy your July 4th’s.