You Better Duck!

Check This out:

This was some video from a recent Fortis shareholder meeting. This is one of the larger banks in Europe that basically was nationalized when the financial system collapsed last year. The stock price now sits under $2.

The sheeple are getting restless across the pond. I wish we had the same spunk over here. Apparently, most of America would rather watch American Idol while their country collapses right in front of them.





A Must Read

I highly recommend that everyone reads this excellent commentary from hedge fund manager Bill Fleckenstein. Bill is one of the smartest guys on the street and was one of the few that accurately predicted the financial collapse last year.

The two paragraphs below from the piece are what caught my eye:

"Though I hesitate to make too much out of one report on the gross domestic product (or government statistics in general), Wednesday's first-quarter GDP data -- which showed a contraction of 6.1%, versus expectations of 4.7% -- make for a wonderful example of what the future holds: essentially a replay of the 1970s, only far worse.

It's not that I find the results terribly surprising or especially alarming. I do not. What's more interesting is that the GDP price index, which measures the prices of goods and services included in GDP calculations, was expected to be 1.8% but registered 2.9%, and that the and that prices of core personal consumption expenditures (a measure of inflation that master of disaster Alan Greenspan particularly focused on) rose 1.5% quarter to quarter, versus expectations of just 1%."

My Take:

There has been a lot of discussion in the news around deflation and inflation over the past few weeks. I strongly continue to believe that we will see massive asset deflation. However, its extremely disturbing to see such a huge spike in price inflation on goods in the GDP report. These numbers are frightening folks.

My worst case scenario for the economy is a combination of asset deflation and price inflation. Many try to argue that we will see either inflation or deflation. In my view you can have both. It won't take long for the torches and pitchforks to come out if wages continue to stay flat or decline while the cost to live rapidly rises as a result of price inflation.

It would make sense to see inflation in areas of the economy right now as we continue to print trillions of dollars in an attempt to keep the debt bubble inflated. However, this phenomenon does not cross over into housing prices.

The deflation in housing and other assets will continue because people can't borrow as much money as they could in the past due to tighter lending standards. Exacerbating this problem is the fact that people are also losing their jobs at an historic pace. The fear that's created by massive unemployment or the fear of getting laid off also lowers the desire for consumers to lend which of course makes the problem even worse! Death spiral anyone?

My question here is how in the hell is the average person going to survive if the cost to live rises rapidly at a time in which everyone is watching their wages stay flat(that is if they had have a job)? Oh wait a second, I have the answer. They have all of that home equity that they can fall back!(Scarcasm off)

I predict you will see consumer confidence plummet if we continue to see price inflation.

I wish I had the answer as to how do get out of this mess folks. I know one thing: Its going to involve a lot of pain.

Raise cash. You are going to need it when a happy meal at McDonald's costs you $15.

One last question:

Anyone have a shoe I can borrow?