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-- Posted Thursday, 25 June 2009 | Digg This Article | | Source: GoldSeek.com

Rick’s Picks

Thursday, June 25, 2009

“Phenomenally accurate forecasts”

The markets displayed disturbing symptoms of Fed-itis yesterday, spasming up and down even though the central bank did nothing remotely interesting, let alone earth-shattering. Monetary policy was left unchanged, which is the only thing that could have happened.  To say the markets overreacted begs for an explanation as to why. We can only infer that there are still many investors who cling to the notion that the central bank can jump-start an economy in the throes of a debt deflation by encouraging more borrowing.  They might as well put their faith in lunar cycles; for if easy money were capable of rejuvenating the economy, then why has an estimated $13 trillion of stimulus produced no decisive upturn so far, nor barely even a blip in a still-deflating housing market?

Despite these glaring failures of monetary and fiscal policy, dreams of a recovery persist. We don’t want to come down too heavily on the optimists, however, since we’re going to need an exuberant army of them to get the economy rolling once debt deflation has run its course in perhaps another five to seven years.  For now, though, judging from the way markets have been obsessing over every mote of potentially bullish news, we would surmise that the optimists will need to experience disillusionment and even despair before they can come to the born-again zeal that will work economic miracles for the rest of us.

Winged Horses of Hope

No such catharsis was possible based on yesterday’s news, however. Although durable goods orders were up slightly, new-home sales fell 0.6% in May. The latter development was said to have come as a surprise, although it could not have surprised anyone who gets his or her information from “underground” sources rather from such mainstream panderers of headlines as the New York Times and the evening news. The latter in particular like to report the news without a mote of reflection, as though the raising or lowering of interest rates should in fact determine how well Americans live. The odd thing is that the newsreaders themselves, even the ones who are sinfully overpaid, must see evidence in their own lives that more credit is not the answer. But if simple touchstones of reality play any role whatsoever in the way the news comes out, they are overshadowed by specters of hope as ephemeral as winged horses and wishing stars.

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Rick's Picks publishes a daily trading newsletter for gold, stock, commodity, and mini-index traders 240 times per year. Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers' initials will be used unless express written permission has been granted to the contrary. All Contents © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

-- Posted Thursday, 25 June 2009 | Digg This Article | Source: GoldSeek.com

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