“…And when output has increased and prices have risen, the effect of this on liquidity-preference will be to increase the quantity of money necessary to maintain a given rate of interest…” (J. M. Keynes, “The General Theory of Employment, Interest and Money”, Chapter 13, Section III, 1936).
Please, click here to read this article in pdf format: december-24-2009
Below is the first chart that I included on my first letter, back on April 14th (refer: www.sibileau.com/martin/2009/04/14 , “Remembering Harberler: The price level may be a misleading guide for monetary policy”). I think this chart says it all. Back in April, the spill over from the Treasuries and Agency debt/Mortgages markets was just beginning. As I foresaw, quantitative easing policies worldwide lifted commodities, taking oil to $80+/bbl and gold to $1,226/oz, and stocks, with for instance, the S&P500 reaching 1,120 yesterday.
Further, in the spring, we heard economists all along say that the markets were overvalued, that a second dip was on its way. All along, I stuck to my thoroughly explained thesis. I also thoroughly explained why the mainstream theses (i.e. David Rosenberg’s:” Reversible rally or reflexive rebound?” Bank of America’s Morning Call Note, April 20th, 2009) was wrong (For instance, also refer to my critic on Krugman’s view: “Why should we see lower lows in stocks and wider wides in credit?”, www.sibileau.com/martin/2009/05/19 ).
Entering 2010, we will reach stage no.4 shown below, where we should see an increase in prices for capital goods and raw materials, as well as the price of the companies that supply them. The tap feeding the waterfall will have shut for the most part, but the spillover effects from tighter spreads in credit will keep feeding a rally in stocks, along with M&A deals, increasing the leverage of companies. As the text for stage no. 4 reads, we will tell ourselves that companies cannot justify their investment levels, and we will not be able to come to terms with P/E ratios. This will only be the beginning of mankind’s greatest illusion or economic delusion. It won’t be nice, because along the way, the head of sovereign defaults will raise its ugly head. Get ready, but in the meantime, profit from the spillover effect. On this, please refer to my letters earlier this month.
Finally yet importantly, I would like to wish everyone a healthy and prosperous 2010. It has been a pleasure writing “A View from the Trenches” and exchanging intellectually challenging correspondence with many readers. This is the final letter of 2009. “A View from the Trenches” will be published again on January 4th, 2010.
Martin Sibileau




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November 4th, 2011 at 3:14 AM
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[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
November 4th, 2011 at 4:22 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
November 4th, 2011 at 5:18 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
November 4th, 2011 at 6:28 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
November 4th, 2011 at 11:15 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
November 4th, 2011 at 12:13 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
November 4th, 2011 at 4:41 PM
Links…
[...]Sites of interest we have a link to[...]……
November 4th, 2011 at 6:39 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
November 5th, 2011 at 5:40 AM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
November 5th, 2011 at 6:34 AM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
November 5th, 2011 at 8:08 AM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
November 5th, 2011 at 5:26 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
November 5th, 2011 at 6:19 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
November 5th, 2011 at 8:13 PM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
November 6th, 2011 at 2:15 AM
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November 6th, 2011 at 5:27 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
November 6th, 2011 at 6:01 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
November 6th, 2011 at 7:07 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
November 6th, 2011 at 7:33 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
November 6th, 2011 at 10:37 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
November 6th, 2011 at 1:59 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
November 6th, 2011 at 4:10 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
November 6th, 2011 at 6:47 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……