The entire market rally has been motivated by "excess liquidity = money for everything at virtually any price". The excess money makes it easy to be loosey-goosey with paying-up for PE deals, buybacks, leverage-up-the-butt. The current cry for "more liquidity" is a sham. There's a BOATLOAD of liquidity in the system. If we accept the conventional wisdom of "liquidity = convertibility to cash", we can see that the problem is NOT "available cash" but rather "willing cash". That is, investors have become concerned (1) they cannot determine the actual value of CDOs and other derivatives, so they are unwilling to bid anything at all, and (2) lenders are no longer putting out loans on a "low credit score, no down payment, no income verification, 125% LTV ratio" basis.... as they are just too risky. It's not that there is "low liquidity" in the system, but rather there is "low willingness to pay for risky assets". When the "unwilling to take on more leverage... REGARDLESS how how much the Fed pumps the money press" psycho sets in, the Fed will be acknowledged as an ineffective, irrelevant, print-money, inflation machine... and the whole house of cards will come tumbling down. Where are we in that process? Can't tell for sure, but it had better be on the the minds of us all. Got gold?
Yea, its interesting that the precious metals have held up ok thus far. Maybe thats because EMs are still ok, but generally in a flight to safety like may 06 the dollar does rally a little bit and that hurts precious metals. The dollar is gaining ground just like last may. I was short a lot of metals yesterday and covered because they could explode. Zillions of yen, euros, and dollars have been injected into this crackpot system in the last two days. Got gold, oil, farmland.
ANYTHING of real value. A warehouse full of toilet paper might eventually make you the "Bill Gates of the barter economy" (US currency is too stiff and not sufficiently absorbent to make good ass-wipe, you know).
Finally someone sees the merit in my investment strategy. My only problem has been storage fees. Also I jack the price overnight in case somebody needs emergency ass-wipe, we all know we'd pay nearly anything for a good wipe at 3am.....
You have to respect that a real debt deflation could happen, but it is much much more unlikely than a massive inflation in finite resources. The fed is going devalue just like it always has the question is how well it can do it without widespread notice by the public. Inflate or die.
Unfortunately, "inflate = die". ALL US citizens, except the very rich, are doomed to economic obliteration due to hyper-inflation.... that's what buys the current Gummint the most time to "get out of Dodge" and hopefully place the blame on some future successor. Sadly, "we the people" are to blame... we vote for them ass-holes what does it to us. And we ALLOW them to continue doing it without holding them accountable.
I think its fair to assume that what happened in real estate will happen to other asset classes. In reality, RE was a rational response to a massive dilution of the US dollar. Now that demand has been satisified something else will take its place as along as the fed and other CBs still maintain the bias to print and provide liquidity. Commodities and farmland are still really really cheap by historical standards. Gold hasnt even touched its last peak of 800 dollars yet which was over 20years ago!