We are seeing a significant unwinding of positions for the sake of liquidity, a selective liquidity crisis.
Certainly there is an ample supply of liquidity available to a select few market players who can access it via the Fed's special facilities.
But for those who need that liquidity to work out solvency problems there is apparently a pound of flesh to pay for it in the sale of assets at distressed prices, or so we have heard.
And the hedge funds are being slowly strangled.
This is the flaw in the Fed and Treasury scheme to support the overall economy, as has been learned over and over in the Third World. They are giving their relief supplies to warlords and mercenaries to distribute to the rest of the country.
Perhaps that image is overdone. We'd have to ask those who are sitting across the table from Goldman Sachs.
Better to be independent we think, than to rely on the rational judgement of these sharks. But what price independence? And where is safety?
From today's Daily Pfennig, Chris Gaffney at Everbank:
I just don't get those that say the dollar will be a "safe haven" during this time, how can the country that is causing the Tsunami, have a "safe haven currency"? I would think the currencies of Japan, Singapore, Switzerland, and China would be the safe havens... With the euro experiencing perceived problems, investors are a little skittish toward the euro... But, remember this, the euro is the offset of the dollar...
Gold started to move back off its recent lows, but the move to hard assets wasn't as dramatic as I thought it would be. After all, if investors are looking for a 'safe haven', how much safer can you get than gold? One argument which I have heard against gold is that you can't get paid any interest on your gold holdings, but if you are willing to earn a negative real yield on US treasuries, an investment in gold actually becomes even more attractive. Logically, events like those that occurred this weekend should set off a buying frenzy in the metals markets...
So precious metal prices are down, just when you would expect them to be rising. And judging from the calls to the desk, supplies of minted coins for both Gold or Silver are getting harder to find. Our metal dealers tell us that the mints just haven't been able to keep up with demand for gold and silver coins, but prices for these commodities continue to slide. Just doesn't make any sense to me... Investors should have a portion of their investments in gold or silver, as a hedge against inflation, and against a possible meltdown of the current financial system.
