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Minyan Mailbag: The True Flight to Safety

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Did you say Fast Farrier Transforms?

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Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next column with that very intent.

Hey Scott,

Just saw your Buzz on
disinflation/deflation and I have a question:

Isn't the ultimate flight to safety GOLD/SILVER? Are we supposed to trust that the Fed won't break out the helicopters and drop dollars everywhere? Isn't that what the Dallas Fed head effectively began to indicate yesterday?

Shouldn't we be looking for GOLD to go up against ALL currencies as an indication of a true flight to safety? This is my central theme right now because I keep hearing people doubting the value of paper (Fiat) money. Your thoughts are appreciated.

Mark Bloudek

PS. TODDO are you ready for another softball bashing this year at
MIM2 from Scott and myself playing left and center field?

Great question Mark and this is where I deviate significantly from the idea that Gold is the store of value at THIS time.

The short answer is no, my models - despite what the long term Austrian macroeconomic theory suggests - are saying that commodities of all types - industrial and precious- are not done with their bear market from the 1980s. Once they are (2009-2012 with a likelihood of slight new lows) they will be the buys of a LIFETIME. But for now my models simply do not suggest it. The bounces they have had from 99/00 is part and parcel to the same reflationary reaction from the worldwide flood of credit we have seen. Once those monies make their way out of commodities, THEN I think we see the hyperinflation that we all know is eventually coming.

The reasons for this are complex and highly detailed (think Kondratieff cycle, behavioral economics and, well, some pretty serious math like Fast Fourier Transforms and log periodic power laws) but suffice it to say I feel strongly about it.

Regards,
Scott

No positions in stocks mentioned.

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