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Faber On Gold, And The 800 S&P Barrier

Courtesy of Tyler Durden

Marc Faber on Helicopter Ben flooding the market with pieces of paper if the S&P were to hit 800 again. The problem with this assumption is what happens to treasury rates. Already all the excess liquidity is bypassing stocks (and definitely bonds which at 3-4% have little room to grow) and going straight into gold. As the US government has to extend and roll maturities, thereby making 30 Years attractive, we would take the other side of the Faber bet: there will come such a time in the near future, when the flight from risk assets, engineered by the Fed, will become as pervasive as today’s dollar carry trade. Ultimately the Fed is more interested in low rates than 100x+ P/E’s (one hopes, or else a gaggle of retarded monkeys can do Bernanke et al’s job better). And with Treasury QE done, and MBS being gamed to the point where the FRBNY is doing all it can to obfuscate just what is really going on in that particular market, one can be sure that Bernanke will be all too happy to sacrifice equities at the bond altar.

After all, as conventional wisdom will have you know, bonds are about 10x bigger than equities. With the upper class already reaping the benefits of a stock market bubble (and likely having long taken profits), at this point it is merely those who are truly gluttons for punishment (and/or the Fed itself) that are buying into stocks. Thus even the liquidity glut may have trouble making headway from this point on: if the Fed is faced with the S&P and Gold both at 2,000, you can be sure stocks will be sacrificed post haste.

 

 


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