I will leave it to the doyens...express it clearly

the debt explosion has left a massive hole that is being filled via QE...but, nothing has been fixed...

Gold will call out the financial engineers on their grand experiment.
http://www.jsmineset.com/2013/02/05/golds-rise-in-price-cannot-be-stopped/



meanwhile Bill Gross keeps mentioning gold:

http://www.pimco.com/EN/Insights/Pages/Credit-Supernova.aspx

Summary

1) Why is our credit market running out of heat or fuel?

a) As it expands at a rate of trillions per year, real growth in the economy has failed to respond. More credit goes to pay interest than future investment.

b) Zero-based interest rates, which are the result of QE and credit creation, have negative as well as positive effects. Historic business models may be negatively affected and investment spending may be dampened.

c) Look to the Japanese historical example.

2) What options should an investor consider?

a) Seek inflation protection in credit market assets/ shorten durations.

b) Increase real assets/commodities/stable cash flow equities at the margin.

c) Accept lower future returns in portfolio planning.

and Kyle says:

http://kylebassblog.blogspot.com.au/2013/02/why-inflation-could-eat-into-stock.html

Bass suggests that investors "own productive assets," such as apartment complexes, oil wells, or global businesses that sell products in different currency areas.

"If you really want to protect yourself, you put long-term fixed rate debt on these businesses," he said.

People continue to scramble for yield," he said, "the U.S. rate curve is still basically flat and low. The Fed is actually doing the best job it can do, but it's also enabling the fiscal profligacy of Congress."

confidence...that's all that holds things together...

From Paul Singer of Elliot Management:

 

"It is critically important for investors to try to understand what global QE is actually doing, where it may lead, and what will happen when it slows, stops or shifts into reverse. What we urge most strongly is that the current atmosphere of calm and stability, and the lack of virulent inflation, must not be relied upon to continue forever. There are certain words and phrases in official communications that give some hint of the uncertainty that exists about key elements of central-bank policies: confidence, anchored inflationary expectations, and velocity are prime examples. Our takeaway is that when investors lose confidence in ZIRP-soaked, QE-ridden, faith-based paper money, the consequences could be abrupt and catastrophic to societal stability. We do not know exactly what to do about it, except to urge policymakers to STOP substituting QE for sound tax, regulatory, labor, environmental, and fiscal policies."

 

I add: There are no free lunches...unless you are TBTF

IT's been a terrible time in the gold equities the last 12 months...

When nothing seems to help, I go and look at the stonecutter hammering away at his rock, perhaps 100 times without so much as a crack showing in it. Yet at the 101st blow it will split in two, and I know it was not that blow that did it, but all that had gone on before. 

Jacob Riis