This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Randall Forsyth (Barron’s): Reflation trade shifting into reverse? October 27, 2009. Risk assets ranging from stocks to commodities to currencies seem to be faltering after being floated on a sea of liquidity.

• Doug Kass (TheStreet.com):   My “fast money” recap, October 28, 2009. I saw some emerging technical signs of market weakness that could override seasonal strength, including three failed rallies in the past week, a contracting number of new highs on the New York Stock Exchange, a breakdown in the Dow Jones Transportation Average and, generally, stocks have begun to sell off on good and bad news. … asked how vulnerable the market was over the short to intermediate term if I used the quantitative models that

In their official statement Wednesday, U.S. Federal Reserve policymakers said they “continue to anticipate that economic conditions are likely to warrant exceptionally low levels of the Federal Funds Rate for an extended period.”

That means interest rates will remain at artificially low levels for some time to come.

And it also means the central bank’s policymaking arm, the Federal Open Market Committee (FOMC), has finally and firmly cemented its role as the Keynesian death panel for the savers of America.

The malign influence of the late economist John Maynard Keynes is nowhere more destructive than it is in the area of saving. After all, it was Keynes who proclaimed that his ideal economy would see “the euthanasia of the rentier” – an abolishment of the class of people who live off of income from savings.

We know that Keynes’ theories are still rampant in choosing U.S. fiscal policy, which has given us

Doug Casey is an American free-market market economist, financial author and entrepreneur. He has been writing a monthly investment newsletter, the International Speculator since 1979 and I always find his ideas quite refreshing. He is also somewhat of a perma gold bull, but nevertheless argues his case convincingly, as gleaned from the interview below with Louis James, editor of the International Speculator.

But before getting stuck in the discussion, Adam Hewison’s (INO.com) has just produced a short technical analysis of the short-term direction of gold. Click here to access the presentation.

Here is the first section of Casey’s interview:

L: Doug, we’ve talked about cars, cows, and cash, but the investment world thinks of you as a gold bug, so let’s give that a go; why gold?

Doug: Sure. First of all, it’s because gold is actually money. It’s an

Debunking The Paradox of Thrift: Why Consumer Spending Won’t Save Our Economy

by Mark Skousen, Contributing Editor

“America’s saving rate has leaped ahead – and it’s sending America to the poorhouse.” – David Fessler

An Investment U column attacking the virtue of thrift – surely not?

Yet there it was – an article from David Fessler on September 12, entitled, “The Paradox of Thrift: How a Better Savings Rate is Fueling the Recession.”

David Fessler is a friend and smart investment analyst, so I was surprised that he fell for one of the biggest myths in economics today – the so-called “paradox of thrift” that Keynesian economists spout all the time.

Here’s the problem with the theory, plus a few stocks that are front-and-center of the opposite argument…

The Keynesian Way

Let’s start with the facts, as David correctly noted. During the

The Paradox of Thrift: How a Better Savings Rate is Fueling the Recession

by David Fessler, Advisory Panelist

We’ve all heard this from our parents: “Spend what’s left after saving, instead of saving what’s left after spending.”

Or perhaps this was drummed into your head: “Always save for a rainy day.”

The idea of saving didn’t just start with our parents’ generation, however. Ben Franklin was giving advice on saving way back in 1732 in Poor Richard’s Almanac: “If you would be wealthy, think of saving as well as getting. Creditors have better memories than debtors.”

As the recession of 2008 hit, Americans suddenly stopped spending, paid down their debts and started saving – some for the first time in their lives…

As a result, America’s savings rate – as a percent of disposable income – has leapt from a little over 1%

This post provides links to a number of interesting articles I have read over the past few days that you may also find enjoyable.

• Lori Montgomery (The Washington Post): Tax pledge is a target as deficits, debt grow, August 29, 2009. During last year’s campaign, President Obama vowed to enact a bold agenda without raising taxes for the middle class, a pledge budget experts viewed with skepticism. Since then, a severe recession, massive deficits and a national debt that is swelling toward a 50-year high have only made his promise harder to keep.

• Peter Goodman (The New York Times): A reluctance to spend may be a legacy of the recession, August 28, 2009. Even as evidence mounts that the Great Recession has finally released its chokehold on the American economy, experts worry that the recovery may be weak, stymied by consumers’

For whatever reason, the French newspaper, Liberation, chose to recall a grim event last week. On February 4, 1912 Franz Reichelt, also known as the ‘flying tailor,’ put on his contraption – a homemade outfit designed to work like a parachute – went up to the first observation level of the Eiffel Tower, hesitated…then stepped over the rail and jumped.

Alas, he did not fly. Nor even float. He fell “like a stone,” the paper reported.

Immortality was achieved, but not the way he had hoped. His stunt was captured by the new motion picture technology of the time. That silent film inspired the very popular Jackass videos, which show people engaged in reckless acts of mischief and mortality.

But we do not have to go to Youtube to enjoy the Jackass genre. We have only to read the news. All over the world the authorities are strapping on their absurd parachutes…and climbing

This must be the period of soul searching, with the Economist engaging upon multi-article exegeses on where mainstream macro went wrong [1], [2], [3]. Alternatively, I think this is a happy time for some economists outside the (perceived) mainstream, who can now chortle "I told you so". One recent example is by Mario Rizzo.

For investors who had money in the markets last year, October 2008 is a month that will not soon be forgotten. In those 31 days, the S&P 500 – a major indicator of the stock market at large – fell almost 17%, reversing the gains of the previous five years.

But as the markets work their way back into health and investor confidence continues to creep up month after month, we risk throwing away the lessons of the Subprime Crash of 2008:

Lots of very intelligent investors got embroiled in huge losses last year. Bernie Madoff fleeced scores of wealthy, well-informed investors – many of whom lost everything they had built up over a lifetime. The collapse of some of the biggest financial institutions, including Lehman Brothers and Bear Stearns, thinned out the Wall Street crowd by the millions. And underperforming fund managers hit close to home

In the past year, cash became a very appealing place to be. Believe us, we know–our own Hands-On tactical portfolio had nearly 60% of assets in cash through much of the crisis. However, as the economy bottoms out (as it seems to be doing) and risk appetites return, we have looked to get back into assets that can generate returns over the longer term, or at least save us from the potential ramifications of today’s loose monetary policy. The quick stimulus spending and cheap cash churned out by the U.S. government and Federal Reserve seem to have helped avoid a Great Depression-style collapse, but it will be extremely difficult in the future for policymakers to steer between the Scylla and Charybdis of excessive tightening triggering a new recession and continued lax monetary policy generating rampant inflation. In this tricky investment

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