Update: Bill Gross on double dip…Market Mover: Gold!

Update: Well lookee here, Bill Gross, the Bond King, agrees with MiM’s assessment on the double-dip, I sure hope he isnt suggesting more spendulus though, UGH that is what got us here, too much spending!:

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…”To the extent that we have had a trillion dollars worth of stimulus, from the standpoint of deficits, and more, the government basically has to continue to do that and to add to that in order to keep the economy chugging along,” he said. “To the extent that that’s limited, to the extent that they pull back on some of those stimulus programs—Cash for Clunkers and those types of things—then the double-dip moves into the realm of possibility.” A double-dip refers to a second leg down in the recession, which many economists say is ending.

But Gross said the situation remains precarious in what his firm repeatedly has called the “new normal” of much slower growth rates than normal over an extended period of time….


Yeeeeehaaaaw! That’s my Dean Scream 🙂

GOLD up 19.1 dollars right now to $975.60. Massive fund buying reports Sharon Epperson on CNBC. MiM has been pro Gold here on the site since we were trading below $900 (going against the soopergenius commodity forecasters who were bearish on Gold on June 15th and making a tidy profit doing so!)

The future outlook is so opaque at this point, having no clue what TOTUS and Congress will do next, I am frankly flatfooted now.

I expect a second leg down in a W. I expect 3Q GDP to be positive thanks largely to Cash for Clunkers, Spendulus and home buyers tax credit. But Clunkers and the Homebuyers credit both ended (the home credit ends November) and BOTH those programs were BORROWING against future sales anyway thereby leaving a BIGGER gap in sales in the future than we would otherwise have had in both those areas.

In addition, housing is looking the Reaper in the face with another 3-4 million in foreclosures expected to peak at the end of 2010, early 2011 (see our previous post here). And of course employment being a lagging indicator we cannot expect a jobs pickup.

That all being said, I think we ended the CYCLICAL recession last quarter. Sadly the massive government intervention that we always seem to fall prey to will with its massive deficit spending, DRAG this out IMO. So no sustainable recovery, just a flat L.

But the flat L shape is based on a moderate in the WH as a check on Pelosi. Not having that, and in fact faced with quite the opposite, an interventionary administration that is framing its positions as the antiCapitalist neo-prog agenda, I feel quite strongly consumers will not emerge to spend and we will in fact have a W shape with a second leg down led by bad public policy on massive government spending, and tax increases across the board coupled with interference in virtually every aspect of the economy be it energy, health care, market regulation, name it they have a plan to change it.

All this being the case, if TOTUS did a 180 and pulled a Big Dawg circa 1994 I think we could pull out of it having the most dynamic economy and citizenry on the planet. Barring that, until the post 2010 mid terms when I predict we take back the very comfy GRIDLOCK role that the economy loves (DEM in WH/GOP in Congress), I think we have a rough road to hoe.

So on the one hand Gold should continue to rise as the US Dollar eventually succumbs to the deficit spending and printing we are doing and drops. Also it is a safety play. But OTOH, Gold may have a LARGE pullback when 3Q GDP comes out positive and the spin-meisters on CNBC gallivant to and fro with journOlist assists talking up the wonderful Obama spendulus led recovery!!

Of course that will be short lived and the massive other shoe will drop. But I would suggest anyone following my GOLD recommendations who now has almsot $100 a oz profit since I last made that call, may want to consider some profit taking ahead of the 3Q pullback…or like me you may want to hold it and ride out the dip to a second rise later…

We are soo not economists, lol.  We are regular folks observing markets and being typical American consumers ourselves, we think we know how, well, how we think! And we apply that to how the rest of American consumers think and that and research are what I base my opinions on. Let the buyer beware and all that….

September 2, 2009. Tags: , , , , . Economy, Finance, Foreclosures, Housing, Labor Department, Obama Administration, Politics, Taxes, Unemployment Statistics, Wall St.

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