Saturday, December 13, 2008

Stephanie Pomboy: My Kinda Bear

I'd never heard of Stephanie Pomboy until this morning when I read this interview with her in today's Barron's. Now I have a second bear with whom I see eye to eye. (The first is Doug Noland at, although I have no idea what the latter invests in.)

[Thanks to for these cute bears.]

She is founder and president of MacroMavens, a company providing "macroeconomic research and commentary to the institutional investment community." The company strives "to identify major economic trends early while avoiding the typical overemphasis on short-term swings."

Isn't that what any wise investor should be trying to do? No one with a 401(k) should be speculating in any way, shape, or form; and that is what they are doing, albeit unwittingly, by ignoring the macroeconomic ebb-and-flow underneath us all.

She believes we should be "long 'socialism,'" that there will be more government intervention, or as she jokes, "partnering with the government." She thinks the next industry to receive a guarantee will be the municipal bond market.

She sees only two potential outcomes of our present interventionist fling: Higher interest rates or devaluation of the currency. She picks the latter, seeing a weaker dollar as being the choice Bernanke's Fed will make. As soon as interest rates start to climb significantly, they will begin a program of Treasury purchasing to prevent it, which will in turn lower the dollar.

It is this potentiality that makes her a believer in gold, for the medium-term profits and protection of capital. I would add that gold plays a role as a thermometer of monetary inflating. (My mantra, remember: You can take gold out of the standard, but you can't take the standard out of gold.)

Barron quotes her:

"We are going to see a secular rotation from paper assets to hard assets like gold. The whole global competitive currency devaluation, including that of the dollar, plays right into that." [--Yes!--] "I do worry about preservation of capital from the standpoint of how many more unconventional policy actions we are going to have. If I'm correct about the economic deleveraging still ahead and that it will continue for many years, that's a legitimate concern. That's why I'm long gold. I view it as the best way to protect my capital."

Yes yes yes.

As she says on her own website and as quoted in The Weekly Standard in January of 2004, “'Far beneath the surface,’ she writes, ‘the tectonic plates under the U.S. economy have begun to shift, revealing a molten lava river of inflation below….'"

How right she is. I've been railing against inflation since I was born, and more recently since March of 2005 on this blog. The 20th Century's experiment with fiat currencies will very likely fail, as they always have in the past.

In the meantime, hold onto your ingots.

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