The graph basically summarizes it all. You can only hike margins so far, and then if money is still free (i.e. 0% or in the case of the USA negative real interest rates) you get inflation. That extra money cannot be put to productive use. It is being printed to make up for the money speculated – not invested – in housing, which is now non-existent and incidentally did not provide real sustainable economic growth (also incidentally the consequence of Wall Street bailout 1.0 following the .com crash of 2001 which led to a decade of dollar debauchment while real wages remained stagnant forcing regular Americans to leverage up without really even understanding what that was). The S&P home builders index over the last 2 years, or the forecast for housing prices in the USA paint a grim picture.
On the flip side, Bill Gross is short treasuries which to me indicates one of two things, he believes a default or ‘haircut’ is necessary, or he is betting that interest rates will rise. Neither of these options will do anything good for the US economy in the SHORT TERM (i.e. the next 5-10 years) as the entire system is one giant ponzi scheme inflated with future taxpayer dollars conjured out of thin air. Some of you have prudently diversified from worthless dollars into gold, or preferably real estate. However if you think that the American government won’t just take your gold, you have another thing coming, as they have before. I suggest you store it in Singapore – you know – the places that have no problem telling America to fuck off, or risk losing that shit when push comes to shove.
Please understand that it is a house of cards, and to preserve that status quo, those in power will crush you, or anyone else as ruthlessly as they did those long commodities in recent weeks. The problem with fighting the markets, is in the end they always win.