What Does it All Mean?

Many investors are asking themselves this question these days.  The market continues to trade in a very dislocated fashion.  Today was a perfect example:

-  Gold Higher.
-  Bonds higher.
-  Stocks higher.
-  Dollar lower.

There are many questions to ask when you read this tape:

Why are bonds continuing to rally as the market has moved sharply higher over the last few weeks?

Why are stocks rallying as the economy continues to show signs of economic weakness?

Why are investors continuing to pile into bonds as the dollar moves sharply lower?

Inquiring minds would like to know!........

The more I look at this market the more I become convinced that it's been taken over by trading robots.

There is no such thing as investors anymore.  Wall St's participants have decided they would rather "front run" rather than "invest".

The fundamentals seem to no longer matter.  The individual investors have figured this out and have decided to bail into treasuries and other fixed income.  Some of the questions I asked above are fundemental questions.

The problem today is the fundementals no longer matter.  I used to think that in the end the fundemantals ALWAYS mattered.  Today I hope this is still the case, but I must admit, I am starting to question if they really matter anymore.

I now often find myself asking myself these two questions:

1. Has the market has spiralled so far out of control that it cannot afford to let the fundementals matter? 
2. Can this country fiscally afford to let the grandest Ponzi scheme ever seen in history to pop?

I keep looking for the "bond vigilantes" who have saved us from ourselves in the past by raising interest rates when government spending started to get out of control.

Sadly today,  they are nowhere to be found. 

Without the vigilantes I see no end to this mess.  We obviously don't have the political courage to clean up this disaster ourselves because the pain is simply too great for anyone to handle.

As a result, the market continues to sit here and ask "Now what?".

We can't sit here like this forever of course.  At some point something will give.  Unfortunately, it appears that it's going to take a crisis before we take the necessary steps that are needed to fix this country. 

I guess I shouldn't be surprised.  It always takes a severe arm twisting before America ever fixes anything. 

One thing continues to be clear as we sit here and wait:  The economy is not improving and things appear to be getting much worse.

I just saw the new August trucking data this afternoon and it wasn't pretty:

This was the largest drop in shipping tonnage since March of 2009 which is when the recent rally started.  This is a key economic indicator that should not be ignored.

The Bottom Line

Our financial "car" continues to sit here in neutral as we figure out the end game to this financial crisis. 

Because we continue to sit here on our hands and do nothing I am leaning towards an inflationary end to crisis.  It appears that we will go down kicking and screaming like a child in the middle of a temper tantrum when the end game finally arrives.

It will end this way because there is no leadership in Washington that's willing to step forward and do the dirty work.

This lack of leadership that's been seen in response to the second leg of our depression assures you that the US will let the crisis dictate the ending instead of us. 

This "lack of action" will likely lead to inflation or even hyperinflation because our currency will depreciate as we continue to spend more and more money that we don't have.

If we were willing to accept our medicine, take the losses that have been hidden by the Fed, and hold oursleves accountable then things would likely turn out differently.

I see no signs that we are heading in this direction.  The Fed will continue destroying our currency as we continue to play "hide the sausuge" via various bailouts and Quantitative Easing.

If you listen to Meredith below, it appears the next trillion dollar bailout will be spent on the states:

As usual Meredith hits another homerun.  The bailouts never seem to end and our dollar will continue to reflect this.

Disclosure:  No new positions taken at the time of publication.