I see that there are billions of dollars of losses for investors in the MBS market. This may run into the trillions soon. Even though Uncle Ben has been printing $300B, this doesn’t come close to America feeling a few trillion poorer. Spending will be reined in, and margin calls will continue, leading to sell offs in everything that holds value. This includes oil, gold, and other commodities which has been a “safe haven”. But before a deflationary trend, commodities spike up, as people get out of cash and into “hard assets”. But when firms and funds need cash because of scared investors wanting their cash back, they will tend to sell their biggest gainers. YTD, this is in commodities.
I expect gold to spike up again as the fed continues to cut, but as they run out of bullets, there will be a mad dash for cash, and I believe many firms and funds will be a bit afraid to borrow even at 1%. They will sell their assets before they “lose even more money”.
