Special Comment

                   Current Macro View         May 14, 2013

1. The first QE made sense, it allowed capital time to adjust to a new reality.
2. QE-2, QE-3, and QE-Infinity, basically attempts to take the economy back to where it was in 2007, made no sense. Why would the goal be to create more bubbles, the real need was to get the economy back to a solid base.
3. One has to accept that the Dow and S&P 500 are not measures of the health of our country. They are a measure of how managers can squeeze inputs to produce a profit. In the current case the loser has been Americans who want to work.
4. The macro effect has been that the biggest asset owned by the middle class, their homes, is well below 2007 price levels, while the stock indexes, owned 80 percent by the top 5 percent, are back or above those 2007 levels.
5. So where does this go?  First we have the blow-off in stock prices as the initial movement out of  T-Bonds pushes stocks to all time highs, then reality steps in place.
6. In our opinion assets, whatever category,  (stocks, land, commercial property, homes, etc) , will decline to levels where the value can be maintained with so-called normal interest rates, maybe 3 percent short-term and 5 percent long-term.  Since 2007 some assets have already declined somewhat, while others are wiggling around their all-time highs or making new highs, but in the end all have a large adjustment at hand.
7. The dollar is in control, and will call the shots on interest rate movement. 
8. So what strategy does one use at this point?  Two choices predominate,  the least risky would be to move out of assets into cash;  and the most gut-wrenching, what we are doing, continuing to increase our short asset mix including a long dollar position.