State economists are working overtime to quantify mammoth growth in their nations’ monetary bases.
The best and brightest out there are calling it quantitative easing.
“The bailout of Citibank (NYSE: C, Stock Forum) is quantitative easing in action, and gold can sense it,” says Justin W. Torpey, who turned in his doctorate in pharmaceutical chemistry for a job as an investment adviser. “Those years between 2001 and 2006, when Japanese T-bills stayed at 10 basis points, gold averaged 30% compound average return. (I read that from Sir Chart A Lot’s Gary Dorsch.) I'll take those odds.”
The growth of paper is welcome and unwelcome. Currency, lots of it, is part and parcel of a planetary rescue of clutched commerce. Japan is the professor of quantitative easing.
Across the world, government statisticians and their supervisors are processing an almost daily flood of projected funding: for British railroad operators and home builders, for Swiss candy makers, for Chinese concrete mixers, for South American coffee ranches and for American lenders and borrowers.
The unwelcome component is the punctured currencies that most nations must endure as they produce currency with few or no proven assets to back it. No oil, no gold, no timber or wheat or cattle or coffee beans.
It’s like a Bowie Bond, but with only the promise of David Bowie song royalties and not the delivery of those payments.
“Quantitative Easing was pioneered by the Bank of Japan to prevent a deflationary collapse. It kind of worked,” explains Torpey, who advises clients for Wachovia Securities in Oakland, California. “With zero percent short-term interest rates, the BOJ printed massive amounts of yen in order to buy government agency debt and swap it for commercial paper and bad bank debt from the financial industry.”
Torpey notes that in the past five weeks, the Federal Reserve balance sheet in the U.S. has doubled in size – quant easing, again. The Fed balance sheet was previously essentially 100% U.S. Treasuries; today it’s less than a third.” (Torpey cites the Dallas Fed and the St. Louis Adjusted Monetary base for those figures, which can be seen below).
Torpey is my kind of thinker. Like the Gold Anti Trust Action Committee, he is part of a subculture of subscribers who are writing history as it happens. “Interest rates were kind of shocking today,” he told me. “The decline in the (U.S.) 10-yr T-note, yield of 25 bps, pretty much put the fear of God in me. It is discounting severely worsening economic conditions ahead. I think something very, very bad (VVB) is coming next week, like an employment number or something that is going to reverse this rally in real quick time.”
That is it for now. The second issue of Ticker Trax By Thom Calandrasoonwill be on its way to paying subscribers -- our subculture, so to speak. We will have in the new service what might be the planet’s best short-sale candidate, plus more from the best and the brightest across the planet, starting up north.
On The Ticker Trax
Ticker Trax By Thom Calandrawill explore planet Earth for those few stakes that offer the prospect of excellent, in some cases cosmic, returns. It is for those who are entirely at ease with stratospheric levels of risk. (Please click here for charter sign-up.)
As we complete our investment research, we fully hope and expect, but cannot and do not promise, stratospheric returns. (Please see inaugural issue of Ticker Trax.) I believe there is a case to be made for individual securities that represent small and mid-sized companies in life sciences, mining, agriculture and energy. Precious and some base metals also get my attention.
See you on Ticker Trax.
HOLDINGS: Thom’s cosmos of holdings is listed for free Stockhouse members on www.Stockhouse.com under the “portfolio setting” for user TCALANDRA. He and his family also own recently minted gold coins. For more ThomWatch, please click here.
THOM’S STORY:Thom Calandra helped his audience find value in a quagmire of investment choices. He also settled a valid complaint with the U.S. Securities & Exchange Commission in 2005. Thom co-founded CBS MarketWatch, MarketWatch.com and FT MarketWatch in Europe. As the voice of Thom Calandra's StockWatch and The Calandra Report, Thom fancied $300-ounce gold before that metal became an investment rage. Thom visited bioscience companies, metals mines and scores of thin-crust pie joints across the planet in a search for profit, fashion and pizze de trippa gorgonzola. Thom's novel PABLO BY NUMBERS was completed in summer 2008.