Here's (click here) a nice piece about what's coming up for USA interest rates.
Starts out with a great Buffet quote, which I'll repeat here because its so juicy: "As the old saying goes, what the wise man does at the beginning, fools do in the end... It’s like Cinderella at the ball. You know that at midnight everything’s going to turn back to pumpkins and mice. But you look around and say, one more dance, and so does everyone else. Everyone thinks they’ll get out at midnight. The party does get more fun, dance partners get prettier, - one more glass of champagne. And besides, there are no clocks on the wall. And then suddenly, the clock strikes 12, - and everything turns back to pumpkins and mice". Its that whiff of fear (which I pick up from that quote) that is one of the things that makes the investing game so fascinating.
The basic idea in the piece is that interest rates may go up sooner than most expect, perhaps at the end of Q2 2010. Dorsch expects that interest rates won't rise til then because: "Since 1954, the Fed has raised rates only after unemployment has peaked." That little nugget was worth the time spent reading the piece.
Here's a little bit about how fair and open the USA's "free markets" are. The plan for keeping inflation in check is to rig the markets for commodities (thereby cheating the commodity producing nations of the world [mostly much poorer than the USA] out of a fair price): "Instead, the Fed is calling upon Congress and the CFTC to rein in energy and commodity prices, especially crude oil, by limiting how many futures contracts hedge funds, investment banks and other speculators can control in 2010."
He ends up by saying that Volcker is calling for interest hikes sooner: "If you wait, it’s too late" and inflation is upon you. But, since when has anybody actually done what Volcker has called for (especially in an election year where the ruling party is in real danger of losing control of the house of representatives)?
So, Dorsch seems to suggest they will wait too late and raise rates too slowly: "If history is a guide to the future, the gold market has been able to climb sharply higher, alongside a rising fed funds rate. The Fed’s last rate hiking cycle, - starting in June 2004, - and beginning with the fed funds rate at 1%, wasn’t able to cap gold’s powerful advance thru May 2006, until the fed funds rate was lifted to 5.25-percent. Thus, for two-years, gold rose 40%, alongside a 425-basis point increase in the fed funds rate, since the Fed was lingering far behind the inflation curve."
The piece is nicely decorated with Dorsch's dual-Y-axis graphs that allow the correlation between seemingly unrelated time series to be visually assessed. Here's an example:
Pretty cool, huh? I'm going to have to learn how to make those graphs myself.