Breach

Today had that feeling of heart dropping realization that we've climbed to spectacular heights, peaked over the precipice just as it dawned on us that we had no cogent plans, nor the proper equipment to traverse safely back down the face of the mountain. Even I have been stunned by the shuddering weakness across virtually every sector and every market just four days into the New Year. I certainly expected a much better attempt to ramp things higher given the plethora of like-minded investors and traders that delude themselves with self-reinforcing theories such as "The January effect" and technical breakouts, breakdowns. As the financial markets flailed, George Bush and his Working Group on Financial Markets met behind closed doors today to discuss the dire state of the world's financial system. And the action in gold and oil, both setting new all-time highs this week helps to crystallize the the dire trap in which these folks, Ben Bernanke and the U.S. Federal Reserve find themselves. Further attempts to print their way out of history's greatest global financial imbalance will be futile to stave-off a deflationary spiral in "good" assets such as home values, stocks and bonds while adding fuel to the explosive rally in unproductive stores of value such as gold, silver and oil. The world's central banks find themselves helpless and impotent. The dam has been breached.