May 18, 2006

The Fed's Dilemma - Gold or Housing

I read a piece of research today from one of MY most trusted sources of commentary - Lehman's DeGraaf.

In a nutshell - here are his thoughts on the current situation:

The fed has a dilemma and two charts explain it - Gold and Homebuilding. One (gold) is too hot, the other (housing) cold (could get real cold). The market has started to pinch the Fed, a harsh reminder that NO ONE (Fed Included) is bigger than economic laws (the sound ones). More tightening to rein in gold and housing is likely to cascade in our view. A pause to pacify the liquidity restarints in housing, and GOLD WILL BE $1,200 IN OUR VIEW.

As Fonzarelli used to say - Whoaaaaaaaa!

For a guy that has to write EVERY day, he is good. Sometimes he just nails the issue in a paragraph and he really bangs the table. I think he has pretty much nailed the current dilemma. I can tell he has strong conviction and he is not going out on the limb here people.

I recently posted that The Fed and the bankers had created a stew that is boiling and they are way over their heads. It has not been in their interest to tell you the truth, but now the markets are taking over.


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