Ben Bernanke is the little man behind the curtain, not the all-poerful wizard. Don’t believe the hype.
On the balance of probability, phase 2 of the credit crunch has begun. The larger trend should be down for a very long time. It is likely to be longer and stronger than phase 1. I wouldn’t touch equities with a barge pole. T-Bills are much safer.
I’m not worried about the US downgrade or higher interest rates on US government debt. The perception of risk regarding those assets is largely an artifact of the rally. That trend, along with many others, is set to reverse. The US should benefit sufficiently from a flight to safety that it should have little difficulty selling its bonds for the next while. As awful as its finances are, it’s the least worst option, at least initially in the deleveraging period.
