REFLATION EFFORTS

We should watch China to see if it now plays catchup to other world markets.

We are witnessing some facts maybe never seen before in our lifetimes. Expanding economy here in the US was always synonymous with expanding credit market debt and a re-energizing in consumer credit...........................

For the first time in maybe 50 years we are going thru a CONTRACTION in total credit market debt, the US CONSUMER IS RETRENCHING.

BUT, GOV AND FED POLICY are fighting this new trend of balance sheet reconciliation, and are throwing the kitchen sink at it, doubling the money supply know in existence in merely months.

BUT most of this is sitting as EXCESS BANK RESERVES, not lent so gold is sniffing a day when it will be perhaps.

BUT Banks (Hedge Funds) have access to almost FREE MONEY and this "excess liquidity" has to find a home somewhere, BUT instead of into productive means, it is flowing into commodities and STOCK MARKETS......and IMHO a NEW BUBBLE IS FORMING.

This does not tell me when the game is over, it does tell me if not productive means, then considering the historic nature of this FED intrusion, it will and may have historic repercussions.

Just as the US CONSUMER is trying to repair the damage done from decades of too much debt, instead of lend a hand to the saver (higher int rates paid on deposits) the saver is being penalized (near 0% on savings)....and IMHO should the US Consumer continue to make attempts at repiar, and GOV and FED policies only help the BIG WALL STREET INSTITUTIONS .....it seems to me these too bigger to fail players are playing with themselves...WHY THEN the DECLINING PUTRID STOCK MARKET VOLUME? which in uncharacteristic of any previous bull mkts?

We do not see any PROOF that the current FED and GOV policies are having a positive impact on the REAL ECONOMY, then I can only conclude it is building an ever more dangerous imbalance that can only be more destructive than anything coming before it.

In MArch, who knows, maybe generational values were seen in cheap stock valuations, but NOW? in only 6-7 months we are back in bubble territory....all the while losing over 2.5 Million jobs and seeing a yr/yr contraction in credit.....how will this turn out?

A BELOW 2% yield on the SPX 500 and expensive PE ratio is telling me the "easy money" has been made, and now MOMO will carry prices to some other level....until it doesn't.

It seems obvious the "little guy" was too scared to buy these bargains, nor maybe had cash. With horrid job picture and dwindling paychecks.....homes no longer able to provide a source of funds to spend......this doesn't spell lasting sustainable economy to me.

The US $ has been the pony to ride this reflation effort, as it steadily has lost value since March, most else has floated higher, but when your currency is not on stable footing, are we better off?

Proof some more profound change has been gained, well we await that data, and I await more reasonable stock valuations.

Duratek