From my perch, it seems that this past week was a watershed moment in American history. Lawmakers appear to be governing by poll numbers; this is not supposed to be amateur hour.
Fear acts as a sort of litmus test for leadership. While Piggy and Jack both put forth unworkable plans of action — Piggy wanting to restrict their living area to the platform, Jack wanting to rush out and hunt the beast down — Ralph is able to proceed with sense and caution. Harkening back to his new appreciation for the power of thought, Ralph lays out his concerns about both plans and asserts, “So we’ve got to think.” He points out that the beast obviously can’t be hunted like the pigs because it leaves no tracks; otherwise, Jack would have already seen the tracks. Remaining all the time on the platform will not work due to lack of fire, food, and space. Ralph is able to keep the group’s focus on the hope for rescue, despite Jack’s attack on his authority.
Fear brings out the dictator in Jack. He attempts to take control of the group, claiming this situation is “a hunter’s job” in which Ralph is not qualified to command.
The whole thing going down in Washington reminds me of Don Rumsfeld reacting to the looting of the Iraq National Museum with, “Stuff happens … and it’s untidy and freedom’s untidy, and free people are free to make mistakes and commit crimes and do bad things.”
All in all, we are witnessing the dynamic of the lynch mob in real time (example, AIG employees hide their badges). It’s a reminder of why history and markets always repeat: people are tribal creatures that keep falling to peer pressure mentality. Anyone that aspires to make money must not act on black/white brainstem reflexes.
I’ve picked out a few videos that I think best represent this moment.
1. Backlash Against the Bailout Backlash
2. The End of the Dollar’s Rally?
3. Treasury Inflation Protected Securities Plays
4. A gold bubble may well be coming our way
A gold bubble may well be coming our way
Gold has little intrinsic value; if it had never been coined its price would probably rest around the $250 per ounce of the late 1990s. However because of its history it is regarded as an inflation hedge and store of value, and that psychological association becomes tighter as inflation worsens and the gold price rises. Hence arguments about the irrationality of gold investment are wrong: in an inflation-prone environment belief in gold becomes self-reinforcing.
5. Bloomberg Interviews
Last, but not least, if you’re in the market for some real analysis, here two good ones:
- Greenlaw Says Fed’s Objective Is to Lower Mortgage Rates [PODCAST]
March 19 (Bloomberg) — David Greenlaw, chief economist at Morgan Stanley, talks with Bloomberg’s Tom Keene about the Federal Reserve’s plan to buy $300 billion of long-term Treasuries.
- McCormick Sees ‘Unprecedented’ Fed Policy Response to Recession [PODCAST]
March 20 (Bloomberg) — Jim McCormick, London-based global head of foreign exchange and local-markets strategy at Citigroup Inc., talks with Bloomberg’s Tom Keene and Ken Prewitt about the impact on the dollar from the Federal Reserve’s plan to buy $300 billion of long-term Treasuries.
Have a good and safe weekend.