Money is growing more rapidly with each passing week as banks expand lending.
This should send bond prices lower - they are.
Stock prices should fall - they did.
But, gold prices should soar - they didn't.
What is going on?
Here are the relevant charts.
MONEY SUPPLY
BOND FUTURES
GOLD FUTURES
WHAT WILL THE FED DO?
The markets are confused, and not telling a consistent story.
Unless the Fed is about to raise short term rates. That's the only answer that makes sense.
Stay tuned.
TACTICS
Prudence is still the watchword. Reduce the size of the book, put all new money in the short end of the curve, and expand money market arbitrage.
Long term assets must have a profitable spread, or don't do it.
STRATEGY
Tell the Board and Senior Management we're in for a long, difficult period.
Reduce expectations, and build capital.
