My last post was just over a year ago. Kids, Business, life the usual suspects. What I can say is WOW. 
At this point last year we at VFG Securities were fervently recommending Silver, warning of the double dip recession, rise of foreclosures and the continued fall of home prices. 


What has happened since then?
Silver went from $15 to $49.82. The European Union started to implode. The stock markets began to crash back to lows with May and June sending the markets down 17%, the biggest month to month drop since the great depression.  Housing had a temporary dead cat bounce but has since continued its month to month fall in price at a pace rivaling no other housing deflation's in history.


Bernanke who had come out in April 2010 with the absolute resolution to end Quantitative Easing (QE) and reduce the Federal Reserves balance sheet because of all the green shoots everywhere within the wonderful economic recovery then makes a dramatic turnaround in August 2010 with the about face announcement that the Fed would print another $300-500B to give an extra shot of stimulation to the "economic recovery". 


Well the rest is history. Nominal prices of stocks dramatically rose with the expected parabolic move in commodities and the US financial media again was touting the life was good.


On November 3rd, Bernanke officially starts QEII but instead of giving the stock market the expected $300-$500B he hands them a $900B adrenaline shot. Of course the markets and commodities continue their meteoric rise with Silver heading from $28 to $49 straight. Oil retouch 2008 levels of $115 and the life was good again.


Or was it?


If a patient has a dying heart and the proper course of action is a heart transplant. The result being pain, suffering, and a slow recovery but a recovery none the less to a life of new opportunities. That is the hard choice. 


If instead your doctor asks you if you would like an instantaneous, pain free solution which would solve all your heart ailments overnight. What do you think most people would choose? Option two of course. He/she then proceeds to give you a big shot of adrenaline and sends your new and improved heart condition out the door.


We all know what happens next. We feel good for about a month and then not so great again. Once the effects of the adrenaline shot wear off, our heart starts to fail even faster than before so we go back for another shot. This time though we need twice the amount of adrenaline to achieve the same result. Like the drug addict we keep going back again and again to doctor Bernanke for our temporary solution.

At the point adrenaline does not work, our options for the heart transplant will dim due to the speed which our heart is dying. It takes time to find a donor and we squandered this time believing the adrenaline solved our problem. 


As we approach the inevitable third round of quantitative easing, how much will the markets react? How much will commodities continue to sore. Only time will tell, but time is running out. Our heart is dying faster than ever and doing the right thing which is to accept the painful but correct course of action , let the stock markets, housing markets, and economic mal-investment flush themselves of the dead tissue until they finally can heal. 


Sadly this is the only solution, one which will become more and more painful to achieve the longer we kick the can down the road with these insane printing press solutions...