Wednesday, November 03, 2010

Fed Destroys Your Money

The Federal Reserve has just thrown down the gauntlet to China and other big buyers of U.S. sovereign debt.  It has announced that quantitative easing, phase 2 will begin the imminent devaluation of the dollar and continue indefinitely.  The first pile of junk food in Helicopter Ben's shopping cart will probably be junk-bond grade MBS backed by nonperforming mortgages originated by Freddie Mac, that ward of the state that continues to lose your money

I have a small portion of my net worth in short maturity Treasuries that will soon roll over, and an even tinier portion in California muni bonds that mature in late 2011.  Those portions are going to stay small indefinitely (i.e., for as long as the Fed remains indefinitely insane).  The bulk of my cash is looking for a good home in stocks of commodity producers and transporters.  Inflation is on its merry way to your pantry and gas tank.