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Blackhawk Ben: Helicopters Hit the Hill

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Chairman Bernanke addresses the world.

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"And who was wrong? And who was right? It didnt matter in the thick of the fight."
--
Billy Joel


Hyperinflation vs. Deflation, or "Asset class deflation vs. Dollar devaluation" as we like to call it in the 'Ville, is all the rage these days.

$100 crude, $1000 gold, insurance, education, groceries - anything we "need" - continues to cost more while things we "want" - cell phones, lap tops, plasmas - have never been cheaper thanks to the world's greatest deflationary force that is the internet.

The dollar index (DXY) is now trading at the lowest level since 1998, putting a feather in the headdress of Chief Ben Bernanke. His pow-wow today at the semi-annual testimony to the House Financial Services Committee will be center stage for the world at large.

There will be smoke signals. There will be mirrors.

Mr. Bernanke assumed the position - in more ways than one - when he accepted the role of Fed Chairman. To be fair, however, he inherited the situation from Alan Greenspan, a man lauded in mainstream circles despite his thumbprint on the structural imbalances.

This mess - and that's what it is - is not one man's fault or one year's doing.

It is a cumulative comeuppance that has grown, built, morphed and manifested since the back of the tech bubble, Fed by credit creation rather than legitimate expansion, encouraged by an A.D.D. immediate gratification mindset.

No, this is not one man's problem. It is a problem for us all. It is a problem for our children and perhaps their children. It is a situation that we must understand and respect if we hope to persevere.

To do that, we must face the facts. To heal, we must take medicine rather than drugs.

Mr. Practical wrote an article this morning that spoke to the risk in the system on the way to deflation. That could be around the corner or it could be years away. The truth is, nobody knows and anyone who claims they do - Sam Zell included - is either lying or has an agenda.

Our mission in Minyanville is to provoke, rather than shape, thought. We've walked the line with you for many years and will continue to call it as we see it, for better or for worse. We simply ask that you see all sides through many lenses as you shape your opinion and position your risk.

At the end of the day, the benefit and burden of your decision making process is yours and yours alone.

Random Thoughts With a Bit of Flava

  • I've had a few mea culpas in my time. I was bearish on financials too early. I sold my energy despite my longstanding vibe that it would overtake financials as top dawg in the S&P. And we can toss gold up there as I was on the $1000 train when it had a 3-handle (and prematurely evacuated). Snaps to Professor Lance Lewis for his steadfast hand.

  • Remember that dude in Something About Mary that broke out in that nasty rash? I'm not there-yet-but that ol' familiar trading twitch has returned. The one that is a function of stress as opposed, to say, love blisters!

  • Penny wise, Yuan foolish? The China "pure trade" catalysts are A) the potential for margin trading, B) Shanghai off 30% in short order and C) he potential for Olympic mindshare. I bought some Baidu (BIDU) and FXI on yesterday's opening and made token sales into the higher close as a function of discipline. And so it goes.

  • Semantic Socialization for the bond bailout package? If banks finance this latest save, it's like borrowing from Peter to pay Paul and Mary. Ambac (ABK) and MBIA (MBI) are counter-party to many bank positions so they're bailing themselves out. Or, if you look at it through the TAF and connect the dots, the Fed is actually bailing them out using the banks as a conduit. Crazy, eh?

  • We've spoken for a long time about S&P 1405 and DJIA 12,800 as big resistance levels. We got within a kitten's whisker yesterday and that's worth noting, particularly given how saggy the financials have traded of late.


Answers I Really Wanna Know…

  • Do the worst ratings ever for the Oscars speak to the migration to a middle class mindset and the avoidance of the "Have's?"

  • How long do you think those little packets of mustard stay good for?

  • What ails Goldman (GS) and how much ugh is currently priced in?

  • Who sang Mambo number one through four?

  • Do people in Hungary communicate through stomach growls?

  • Didn't I say a few months ago that if Goldman didn't take a write-down, I would eat my hat?

  • If you turned that chart upside down, would you be a buyer or a seller?

  • Can the young Yankee pitching staff hold their own?

  • We know massive--but which way?

  • Do you think the people that built the Great Wall of China were pissed at the Wright Brothers?


R.P.

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