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.

Yuck.

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