Depression Over? Hardly!

Today (Thursday), while the rally was in progress, Jim Cramer - bulls cheerleader - extraordinaire came onto CNBC for a brief stint and proclaimed that the “Depression” was over. Tonight when I was reviewing charts and looked at the action from today, it hardly screams “Depression over”.

In fact, the trillions of dollars that are being printed out of thin air are going to create the largest bout of inflation that this nation has ever witnessed. To the extent that depressions are usually deflationary events, I would say that Cramer may be right. They’re dumping so much money onto this event that inflation will become rampant.

In my opinion, today was totally a news driven day.

• Mark-to-market rules abolished
• G20 fiasco
• Trichet - small cut, tough on Euro (more to come on this)
• USD tanks, Euro rallies, equities rally - Hooray!!

Tomorrow (Friday), we’ll be faced with more depressing employment numbers. There will be more concern on the part of the Chinese. If the USD shows extended weakness, then you can be sure China will start to become more concerned. They are now cutting back on US Treasury purchases. I’ve said this prior, but I believe that the US Treasury market will move front and center and will become a major determinant of direction of the USD and equities.

I feel that at some point the USD will become correlated with equities, positively. Today, as the USD drops in value, commodities and equities tend to rally. Today, Trichet was tough on the Euro and it rallied with US equities.

When China slows purchases more drastically, rates will start to rise and it will be tougher to finance our deficit. Credit will continue to dry up , which will be bad for business and the economy. This perception will carry over to equities. As the USD drops, equities will also. I’m not sure when this will take place, but I’m watching.

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