gainspainscapital.com / By Phoenix Capital Research / January 7, 2013
Having moved to the sidelines due to the uncertainty of the US Presidential election and the Fiscal Cliff negotiations (as well as the holidays), investors are beginning to creep back in the marketplace.
And they’re in for a surprise.
First and foremost, the commitment of traders report indicates that investors are more bullish now than at any point since 2007. This is truly extraordinary given the sheer magnitude of the issues the global economy is facing. The only clear reason for being that bullish at this point is belief that the Central Banks will continue to flood the system with liquidity pushing stocks to new all time highs.
The problem with this belief is that the Central Banks have reached the limits of their policies. The ECB promised unlimited bond buying under the conditions of a country formally requesting a bailout.
No country in Europe wants to do this because it would mean A) opening their books to EU officials (along with the realization that said books are cooked B) any formal EU bailout requires austerity measures which Greece has proven are a disaster for politicians.
On the other side of the pond, the US Fed publicly announced QE 3 and QE 4, giving the bulls the belief that the markets are primed to soar to new highs. However, privately, the Fed balance sheet is virtually unchanged year over year. And the latest Fed minutes reveal that dissent is growing at the Fed regarding the efficacy of QE. This, combined with discussions of spending cuts in the US, has kicked Gold and Silver down in the last few months.