Gregor Weekly Macro Note: Saturday 24 October 2009

• Gregor Macdonald
• October 24th, 2009

Excuse me but I’ll need to check your bag: In hindsight, I believe there will be two groups of market observers that will awaken over the next 12 months to ask themselves the following question: how could I have been so wrong? In the first group, we have the conventional recoverists, who continue to apply post-war analytical frameworks to everything that’s happened over the past year. They see a bottom in housing. They forecast a pick up in job growth. They happily use the government’s headline number to measure unemployment. And, they have respect for the FED, and wonder when Bernanke will start to remove policy accommodation. For this group of people, there was never a time before TV: you know, when depressions went on for years, when the USD was not the reserve currency, and when Providence didn’t step in to save the Americans.

The second group are the brittle deflationists, who see 60% of our current, sorry situation with ice-cold clarity but refuse even now to acknowledge the country’s currency as the governor to our ultimate outcome. In my own work I actually read a great deal of the analysis of many of these deflationists, because their articulation of the problem is so correct, so spot-on, so finely crenelated, if you will, that to ignore them would be a great error. And then, having paid their fine work the respect it deserves, I then move on to the other 40% of the problem to see the full picture. I don’t mind at all they they cherry-pick year-over-year inflation data from July of 2008 to July 2009, knowing full well they will silently ignore that same data series when the January 2008 – January 2009 data is published. That’s OK. Their long form treatment of dead shopping malls, permanent unemployment, and grands sweeps of history are well worth my time.

I have many questions for both these groups of people, but, as we head into next week’s gargantuan debt auctions, the most pressing one is this: what are you going to do about your Treasuries? And then further to this, what are you going to do with all your other assets should Treasuries start to run into trouble? You may not have noticed this week, but the recoiling in global equities did very little to improve the position of either Treasuries, or the US Dollar. It is wise to note such action. For a number of years I have gladly joined others in the dark joke of the Four Horsemen: Equities down, Treasuries down, Dollar down, Gold up. Did we see hints of the Four Horsemen this week? (this article continues for subscribers through the membership gateway, on the right side of this page.)

Subscribe to read the rest of this article.

More from Gregor Weekly

• Gregor Weekly Macro Note: Saturday 03 October 2009
• Gregor Weekly Macro Note: Saturday 17 October 2009
• Gregor Weekly Macro Note: Saturday 19 September 2009
• Gregor Weekly Macro Note: Saturday 28 November 2009
• Gregor Weekly Macro Note: Saturday 29 August 2009

From the Stocktwits Network

• October 2009  (StockTwitsFX)
• Weekly Gold and Crude Oil (Chart.Ly Blog)
• September 2009  (StockTwitsFX)

Tickers: Australian Dollar, Banksy, Copper, Debt, deflation, FED, FHA, gold, Housing, Inflation, MBS, Oil, silver