By Dominique de Kevelioc de Bailleul
Gold bugs salivate at the turbo-bullish implications of this recent discovery by two economists of an oddball indicator that investors can compare with the U.S. Commerce Department’s jury-rigged GDP number.
Recent guest interviews on King World News (KWN) that suggest a huge short squeeze in the gold market is about to begin a massive rally in the yellow metal got a boost Thursday from a couple of economists’ and their analysis of garbage.
According to economists Michael McDonough and Carl Riccadonna, of the 21 categories of items shipped by rail, which aid economists in their forecasts of GDP, the amount of waste hauled away demonstrates the highest correlation (82%) to domestic output. Makes sense. As the U.S. produces, it throws away, too.
Well, the verdict is in on the amount of crap carried off on Warren Buffett’s rail-cars. Waste cargo is down, way down.
And it’s tanking fast. It appears that delaying getting back into the gold trade may cost traders, as the news media echo chamber prepares to suddenly and simultaneously begin parroting that a ‘Double-Dip’ Recession or Depression is back in the U.S.—and from the looks of the chart, below, it’s likely to be another 2008 economic cliff-dive, as well.
As CNBC and Bloomberg continue to promote hope. there’s little doubt now among professional traders that the coy Ben Bernanke has already crafted his QE speech and readied it to be deployed at a moment’s notice. Gold’s close above $1,600 tips the hand of savvy traders front-running a Fed capitulation to use the printing presses more aggressively.
“I would say that from now on, any economic number being released which is showing an improvement [in the U.S.] is probably either a fluke or a phony figure,” Matterhorn Asset Management’s Egon von Greyerz told KWN on Friday.
“We are not going to see growth in the next few months or even the next few years,” he continued. “If you look at the U.S., home sales are down 8%, durable orders are down, and debt is continuing to increase.”
Despite global-wide GDP statistics that show small growth, which von Greyerz said are “phony” numbers, better evidence suggests that the entire global economy has accelerated to the downside, therefore, prompting the need for Chairman Bernanke to accelerate asset purchases at the Fed—with this next announcement possibly including outright buying of stocks on the open market. Yes, the Fed is legally able to by U.S. equities.
With the Germany’s Bundesbank still “resistant” to the idea of bond purchases to match Fed policy of monetizing U.S. Treasuries, according to UBS’s Art Cashin, the U.S. dollar may become the next focus of the dormant bond vigilantes, as rates on the 10-year Treasury note reached a record low 1.39 percent this week, a rate lower than even the Fed’s massaged GDP deflator of 2.1 percent.
Liquidity, then, appears to not be the motivation behind more Fed QE, if we can take Bernanke’s word for central bank intervention “if needed” to allegedly increase employment. Cashin believes the Fed is attempting to hide its monetization of U.S. sovereign debt by constantly talking about jobs and economic growth as reasons for central bank intervention.
“By standards, the amount of liquidity that’s around the globe should be hyperinflationary,” Cashin told KWN on Friday, with the dollar most likely leading the way down against gold during the next QE program expected by the Fed.
“The real time bomb here is that large short position in the euro,” said Cashin, suggesting that the dollar’s next major move is decidedly down. Gold is poised to soar in response.