Dear Uncle Al:
I know you keep harping about this being a "new era" and all, and as always, I know you are right, but I'm getting a bit worried and need a bit of "hand-holding". Maybe I missed the true meaning of your words (not to hurt your feelings but this happens from time to time, even for those of us who know you so well). I'm probably wrong but yesterday's stock market activity sure seems to support the contention of some of my stock market pals that we are indeed into a "new era" but that it is not the kind of "new era" that you or CNBS talk about, but a "new era" as in BEAR MARKET. Yesterday sure seems to suggest that they may be right.
Not to restate the obvious, but to have one of your most daring, (indeed shocking) moves, bludgeoned into the dirt in TWO days....., man this is historic and scary stuff. You must have been wide awake, staring at the ceiling last night.
So now what Uncle Al? Another rate reduction in the coming week? Well if the market chose to effectively ignore the (supposed) benefits of Wednesday's largesse, how long might the benefits of another rate reduction last,..... two or three hours? I hate to say this, but it is a terrible thing when one's remaining powder turns out to be soggy. Please reassure me that this is not the case.
I have another worry Dear Uncle. Remember how you explained to me that we Americans (unfortunately) have to maintain higher interest rates than they do in Europe, to keep those ungrateful wretches from selling all those treasuries they currently hold? Well what happens now? I don't see them dropping their rates yet. Unless I didn't understand the concepts you taught to me, if the Europeans don't very quickly carve their rates down, then can we not look forward to a dollar in free fall, treasuries by the boat load heading back to Mother America, a frigid U.S. bond market and those all-important foreign holders of U.S. denominated assets deciding that an early exit with small losses is better than staring at a smoking crater where their "holdings" previously existed? In other words, Dear Uncle, what the heck are you going to do now? No doubt I am missing something here, but wouldn't further rate cuts just make things worse? Let me know what I am missing.
I realize that you are powerful and omnipotent, but the gods seem to be conspiring against you. We both know that if this market lets go, then the U.S. economy takes it in the throat and already, I see plenty of my buddies getting pink slips. As we are both well aware, this, more than anything else, tends to spook Joe Six Pack. Tell me if I am wrong, but again, as you have taught me, if consumers start to feel less wealthy, then they also stop borrowing and there goes the whole ball of wax (and that is exactly what seems to be happening, at least as I see it out here in the boonies). If I am mistaken, for goodness sake, please let me know, as I am worried about my mutual fund holdings and getting so antsy that I am even questioning the concept of "being in it for the long haul" (I know, I know,.... heresy).
And about the gold market, Dear Uncle. What do we do if that whole "gold-carry trade" thing you were telling me about (you know,.... the game that keeps the price of gold down when you lend the gold out of Fort Knox), escapes the clutches of your cronies (as it may well be doing as we speak). It sure didn't help yesterday when Mario (and I don't mean the hockey legend) let it out that he and his gang have been accumulating shares of the gold producers. How long before a few more institutional types decide that their present "nil" gold allocations might look like "fiduciary ineptitude" downstream and decide to add a bit of the yellow metal stocks to their portfolios, just to "be there"? Heaven help our cause if this starts to pick up momentum, given the size of the gold short position.
I know you are very busy at the moment, but blood is thicker than water, and I am your kin. Let's hear from you soon, as my wife is making my life miserable over that new SUV I bought last summer (the bank keeps calling as the stocks I gave them for collateral apparently have fallen in value). While on the topic, when do we see some relief in gas prices as it is killing me to fill that SUV's tank and it barely gets me out of the driveway before it needs to be refilled. Also, should I take out another mortgage on the house? Some nice people from a bank I have never heard of sent me some material that says they will give me 125% of the assessed value of the house. As our current mortgage is for only 110%, it would sure put some dough in my jeans at a time when I could sure use it as that rotten broker of mine keeps on calling me about "margin" (let me know what that is all about when you reply), and he is getting aggressive. Hard to believe, but the little twit won't let me buy the current dip until I do something about this "margin" thing. I also need your reply so that I can show the wife that we can borrow some more without worrying. You know how she is about debt (I know, it "serves me right for marrying a girl from farm country").
I look forward to your reply as soon as you can.
Your loving and respectful nephew,
Earlie |
