Wake Up!

Jim Mellon and Al Chalabi, authors of "Wake up!" , have emailed their latest interesting and useful newsletter. It concludes:

Our strongest recommendations are as follows:

• Prepare for rising inflation – continue to buy gold;
• Sell government bonds;
• Look for cheaply valued strong stocks – BAE and BP in the UK are two examples, and in the US we like Pfizer.
• Deploy cash wisely – our current favourites are, believe it or not, the British pound; the yen is weakening, but at 100 yen to the dollar it is a buy again.
• Avoid the US dollar and the Euro.

Like that bit about the pound - I was scratching around looking for something to save what's left of the savings.

Dow 4,500 within 12 months - Cederholm

Fred Cederholm gives a Dow target close to the one I'm thinking, though I think we may have a reality-denying rally before then, so I don't necessarily agree with his timescale.

FDIC could fail - update

I've passed on the bad news about underfunding of the FDIC before - latterly here - and now it come to the fore again in a post from Karl Denninger.

UPDATE (7 March 2009): Jesse has a piece on it now, too. But "deposits would remain fully backed by the government,", says his source - not much comfort for the taxpayer, then.

Webcam: gold vault at the Federal Reserve

Live picture (updated every 30 sec)

According to GATA, they ain't got it no more, nor they don't want it back, neither. (htp: Jesse)

What happens when everyone knows?

Do buy, Dubai

P.S. Did you think I was joking about Dubai as a world leading financial centre? Where the footballers lead...

It was said years ago that 90% of £20 notes in London bore traces of cocaine - because footballers have 90% of the notes. Sadly for some footballers and Old Etonians, possession of cocaine in the UAE is punishable by death. Nevertheless, lovely weather and no crowded, litter-strewn South East England commuter trains.

Could you stand Paradise? Or are you hooked on that museum of past industrial glories, the UK?

If GE falls...

Karl Denninger notes that there is heavy betting that GE, the world's tenth largest company, will fail by summer.

Engineering Analysis

Positive feedback is a term used by scientists and engineers to describe a feedback loop process where the output of a system drives increased input to the system.

In human terms, one such example is drug addiction, where increased use leads to increased desire for the drug.

A more interesting example can be seen in the 'sudden acceleration' lawsuits against Audi some years ago. Once the cars were examined, it was determined that the drivers had been pushing on the accelerator pedal, rather than the brake. Because they were convinced that they were right, they pushed harder as they gained speed. In some cases, the drivers injured their own legs from the pressure, and bent the pedal.

The past 30 years have seen such a loop in the housing and financial sector. As house prices went up, they released fiat cash into the system, driving prices even higher. This, of course, led to the 'brilliant' idea of packaging mortgages. At some point, the profit margin became so huge that no 'real' industry could compete, which pulled even more investment capital into housing derivatives, and further crippled manufacturing.

Without a governor in place, by way of careful regulation, these crashes are inevitable. The capacity of the internet in moving money only sped things up a little.