Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Inflation on Demand & Along the ‘Continuum’

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Global markets are in the midst of a predictable relief rally to the technical bear market that recently became actualized off of various topping patterns that were in force for most of 2011.  It is important to note that this is coming off of a similarly predictable whiff of a deflation scare, as US and European debt 'imbalances' (a polite way to put it) spooked the public out of asset markets and into US Treasury bonds, among other 'safe' havens.

Ben Bernanke, the current US Fed Chief, is a deflation scholar after all.  He is the man for the job and if he was hesitant to do his job, as was the case last spring amid the 'austerity movement' and a red-lined long term T bond yield, he can be less so now.  The 'bad cops' (Fisher, Plosser, Bullard, etc.) at the Fed have been marginalized for the time being with people like Robert Reich and Paul Krugman, along with their decidedly less financially austere views, are back in the public consciousness.

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Inviting the Vampire

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Nosferatu's Shadow

Dear SOH, I love October and Halloween, don't you?  😉

This article in no way pretends to be real, actionable analysis like that which appears in Notes From the Rabbit Hole (NFTRH) each week.  Rather, it is just a metaphorical riff on a big picture macro economic theme that is currently in play.

Setting the clock back to January of 2011, we find long term Treasury bond yields hitting a critical high along the 'continuum' and finally beginning to signal an end to the inflation hysteria – born of the previous Fed sponsored QE campaign – as illustrated on the blog in May.  At that time, it was noted that the Wizard (metaphor temporarily switched to 'Vampire' for today's article) was powerless to work his magic against an oncoming economic contraction in the face of inflamed inflation expectations (long term yields at a 'do or die' breakout point parameter) and a then rising 'austerity' movement in the US.

Well, you see in the picture above (source info) that times are much different, a mere 6 months later.  Indeed, austerity has been cast to the scrap heap as the usual macro-managers come out of the woodwork, one after another, and invite the Vampire back into our homes.  You know the legend is that the Vampire must be invited in, don't you?  There is nothing like decelerating global macro-economic fundamentals and caving asset markets when it comes to inviting the Vampire to do his work.

Why are we using the Vampire as the metaphor for the US Fed (and I might add, its counterparts the developed world over)?  Because they are now being called upon… invited to provide more policy – in the name of asset price inflation – that is ultimately destructive to would-be normal, healthy economies that thrive on productivity and investment of capital toward these things of productivity and value.

In short, more inflationary policy creates more macro debt burden, provides potential asset price inflation and a growing overhang from which many economies will fail to recover (insert here the macro subplot in Greece and the PIIGS in general, which are just a tip of an awfully big iceberg) as inflationary policy sucks the life out of a real economy over time and cycles.

So we have come full cycle.  The updated chart of the 'continuum' is in a picture, an invitation.  The most recent red arrow indicated a time when the Vampire was reviled and politically scorned.

The 'continuum' AKA secular trend in 30 yr yields

Now we have a different atmosphere – expected by this writer and indicated by the chart above so many months ago – with deflation and systemic collapse at the forefront of the collective financial and economic mindset.  Austerity?  Please, give me a break.  The Vampire has already received his invitation, but having been scorned so soundly earlier this year, he sits back and lets the call become louder by the week.

The balance of current NFTRH analysis holds that he may await a final capitulation to be sure that the invitation is near unanimous.  

http://www.biiwii.blogspot.com
http://www.biiwii.com

Gold is Getting ‘Fixed’

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Dear SOH, hi, it has been a while.  It was no use writing on the blog of a 'gold hater' like Tim 😉 and puffing up my plumage as the barbarous relic soared toward $1900/oz.  It is much better to do so during some serious carnage and questioning of the 'play'.  A deflationary event that I expected in the summer of 2010 (until the primary indicator, a gently bottoming gold-silver ratio {GSR}, was blown up by QE2), is finally upon us, complete with an impulsively rising GSR, which has broken out of a strong resistance zone we had been watching.

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Goldbug Headlines

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Actual headlines from a popular internet site.  Don't take this the wrong way, because I highly respect a couple of the names below.  But if you think this is bullish… think again.

Rick Rule – Silver Will Trade Like an Internet Stock to the Upside

Turk – Gold & Silver Have Bottomed, Summer explosion Ahead

Embry – System Wide Meltdown as US to Enter Hyperinflation

Eric Sprott – We're Headed off a Cliff, be Wary of Paper Assets

Hathaway Confirms Gold to Trade in the 5 Digits

Jim Sinclair – Gold to Exceed $12,500 to Balance US Debt

The problem with deep thinkers in the gold 'community' is that their subject matter is very dynamic and usually flat out scary.  So how does one get one's deep thoughts out to the greater world in an organized and strategic way so as to minimize stirring the herd up and getting their emotions all in an uproar (and panties in a bunch)?  Answer, it's impossible.  These sites get a lot of traffic and new gold bugs – complete with new Gold 101 manuals from which they read and lecture – are minted every day.

It's just that in its interim swings, the markets sometimes fail to get and play by the memo.

http://www.biiwii.blogspot.com
http://www.biiwii.com