Three themes

The three macroeconomic themes that have continually been alluded to on this blog are currently at the forefront of the news. First, the rally in commodities, especially metals, is in high gear. Though I am still extremely bullish on gold, I think that a selloff that will trigger buying by System HAG is probably only a week away.

Second, Cisco announced solid earnings today. I maintain that the next wave telecommunications buildout will be bigger than we can imagine, and that Cisco is the core technology stock to own.

Third, inflation. The Fed meeting that will give us an indication of Bernanke's monetary policy is only a day away. As indicated earlier, I think Bernanke wants to allow as much unexpected inflation as possible while continuing to indicate that he is an inflation hawk. I would guess that his policy statement at this meeting will contain a strong anti-inflation message, while also hinting that rate increases might pause. This hypothesis has been supported by the gold market, which has already inflated.

This inflation is necessary because of the imminent housing market slowdown. The lure of other good investments in the world economy will shift capital away from real estate, which has no ability to outperform other investments going forward. Without an inflationary environment, we run the risk of entering a deflationary environment, which is much more devastating. Luckily, the man in charge is an expert on this subject.

As expected, the ones who will lose out the most are the poor (as necessities become more expensive) and holders of variable-rate loans.