What a difference an evening makes – once word began circulating that Ireland was going to be bailed out by the ECB suddenly the hedge funds fell back in love with risk after seeking a divorce from her just the other day. The result – where some markets were limit down yesterday (cotton), today there were limit up. Such is the fickle nature of global capital flows or more appropriately, hot money flows. Do some of you out there find it as amusing as I do watching these hedge funds panicking over Chinese talk about rate hikes to tame inflation only to then run right back into every single market that they threw away the previous few days once they see more QE this time coming from the ECB.

Make no mistake about it, the ECB is engaging in its own version of QE, just as Jim has repeatedly said they would. And if anyone is under any illusions that this was about Ireland, please let me dispel that notion here and now. It is about bailing out the BANKS who are on the hook for the money loaned to Ireland. It is always about the big banks ( I think that there is a special place in hell reserved for that crowd of international thieves). Now that Ireland has apparently received the same treatment as Greece, I suppose Portugal and Spain are next in line.

I wonder what Germany must be thinking about all this.

Regardless, the European Monetary Union is a joke – everyone knows it – there is no one size fits all policy that can ever make this forced union which resembles a patchwork quilt function properly. That did not stop the hedgies from bidding up the Euro once again with the result that down went the Dollar and up went the entirety of the commodity world. Fundamentals be damned; it is off to the races again as inflation is now back in vogue whereas yesterday it was deflation that the hedge fund world was enamored with.

I still have my eyes on the bond market as it could not take out this week’s high and is sharply lower today as I type these comments. That market more than any other is what I am watching to tell me what the investor sentiment is towards inflation or deflation. Based on what I am seeing of the price action, inflation is winning out unless the bonds can pull off a major reversal and climb back above 129 by tomorrow afternoon. That looks remote right now. Failure to do so will have cemented a major top on the weekly charts with the bond market failing to climb much above 135 back in early October thus creating a double top that was confirmed with last week’s breach of the 129 level. The implications for gold are obvious – it is going to move considerably higher once the market becomes totally convinced that the gazillions of dollar and now Euros floating around the planet are going to result in a strong surge in inflation. China is already struggling with inflationary pressures, thanks in part to their refusal to let their currency float higher in combination with the Fed’s QE which is pushing investment capital into China and causing enormous problems for their managers.

The bounce higher in >JSMineset.com