Monetary Nonsense

Bitcoins are now worth over $200, to the dismay and disgust of gold bugs everywhere who were expecting a panic into gold. Not clear whether the seminal event was the losses to depositors in Cypriot banks, or the decision by the BoJ to double its monetary base through purchases of everything in sight. Either way, gold fever seems to have morphed into bitcoin fever. Gold itself is more than $300 off its 2011 highs and looks like being about to break support at $1540, consistent with trends in consumer prices that are generally disinflationary to deflationary. Dr. Copper is also sliding, as are commodities in general and there are certainly no wage pressures, except in the executive suite.

Unfortunately it appears that retail investors are piling into stocks (and houses) once again at exactly the wrong time. The Fed’s third major bubble is ready to pop by all indications, as stocks have diverged from just about everything in sight. It is just a matter of some unpredictable event that will trigger the stampede.

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