What I am trying to get my arms around is how buying MBS's in a already low interest rate environment is going to add any more juice. I mean people who can refinance probably already have, right?
Also, how does adding energy and food input cost into a company's cost of goods sold into a no pricing power environment boost already sky high margins?
This is all about the banks and government spending. The banks need their assets rising in value prior to Basel III and the Federal Government needs Capital Gains revenue, as income revenue is dead. They are channeling their inner Clinton.
This will be like watching a Tron movie to see who cuts off who first; animal spirits rising like a Phoenix or the the collapse of American's buying power. But we will need to wait to watch that train to crash, as I remember in 2007 watching in amazement, prices for homes going past everything I thought possible, and I live in lulu land Southern California. I guess it is going to work until it doesn't (the great asset re-puff).
Before I show some charts, I wanted to show you a couple of charts from a friend of mine. who has a cycles blog called Cycle Trading http://likesmoneycycletrading.wordpress.com/. He gave me permission to post these charts, as it informs our investing decisions.
Bottom-line is after a pause or small reset his view is we roll over hard in the dollar, and with that risk assets, especially hard assets will fly. This blogger has been amazingly prescient and I encourage you to book mark his page and check back often. He knows his stuff.
Now some charts, enjoy.