Thursday, December 17, 2009

De ja vu

I've been on a blogging hiatus, but things are getting really interesting now. It appears that the equity markets are tapped out following TARP repayments by Citi, BofA, & Wells Fargo. To me this marks the second phase of Great Depression II. The big banks are now sufficiently capitalized to begin their assault on the smaller regional and local commercial banks. This is what happened in the first Great Depression. The fist leg down, like October 2008-March 2009, occured in the final months of 1929 through the middle of 1930. A six month bear market rally ensued which allowed big banks to recapitalize for the next leg down. During the next leg down JP Morgan gobbled up many of the thousands of small banks that went belly up.

My fear is that the next shoe to drop will be longer and much more brutal to individual wealth and freedom than even the first Great Depression. Many of my commodity positions have been knocked down quite significantly and I wouldn't be surprised to see massive unrelenting deflation for the next few years. The government helped kick the can down the road by trying to offset the contraction in private credit, but it looks like things are about to really pick up and the people who did have substantial reserves to ride out a 6-12 month downturn are starting to run dry. I still see too many people think that things will return to the days of 2004-2006. It ain't going to happen and people need to protect their wealth from those who try to take it, legally or illegaly.

Phase II, here we come.

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